THE  LATIN  AMERICAN  RETURN 
VISIT  COMMITTEE 


^POINTED  BY  THE  SECRETARY  OF  THE  TREASURY  OF  THE 
UNITED  STATES  IN  COMPLIANCE  WITH  THE  RESOLUTION 
OF  THE  FIRST  PAN  AMERICAN  FINANCIAL  CONFERENCE 


ISSUED  BY  THE  SECRETARY  OF  THE  TREASURY 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 
1918 


REPORT 


OF 


THE  LATIN  AMERICAN  RETURN 
VISIT  COMMITTEE 


APPOINTED  BY  THE  SECRETARY  OF  THE  TREASURY  OF  THE 
UNITED  STATES  IN  COMPLIANCE  WITH  THE  RESOLUTION 
OF  THE  FIRST  PAN  AMERICAN  FINANCIAL  CONFERENCE 


ISSUED  BY  THE  SECRETARY  OF  THE  TREASURY 


; 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 
1918 


TABLE  OP  CONTENTS. 


Report  of  Latin  American  Return  Visit  Committee 3 

Report  of  Financial  and  Commercial  Commission  to  Argentina 11 

Appendix:  Notes  on  leather,  hides,  and  related  industries  in  Argen- 
tina, by  Owen  Gathright 24 

Report  of  Financial  and  Commercial  Commission  to  Uruguay  and  Para- 
guay         31 

Report  of  Financial  and  Commercial  Commission  to  Brazil 38 

Report  of  Financial  and  Commercial  Commission  to  Peru,  Bolivia,  and 

Chile 40 

Report  of  Financial  and  Commercial  Commission  to  Central  America 74 

2 


REPORT  OF  THE  LATIN  AMERICAN  RETURN  VISIT  COMMinEE. 


SIR  :  I  have  the  honor  to  transmit  on  behalf  of  the  Latin- American 
Return  Visit  Committee  the  reports  of  the  parties  sent  out  under  the 
direction  of  the  committee  appointed  by  you  pursuant  to  a  resolution 
of  the  First  Pan  American  Financial  Conference,  adopted  May  28, 
1915.  The  resolution  in  question  reads  as  follows : 

That  the  Latin-American  States  unite  in  inviting  the  bunks  and  industrial 
and  commercial  groups  here  present  to  join  together  and  visit  within  a  period 
of  six  months  the  countries  of  Central  and  South  America,  where  they  will 
be  received  by  Governments,  chambers  of  commerce,  and  industrial  interests. 

To  which  end,  the  Governments  of  the  countries  to  be  visited  will  hold  it  an 
honor  to  have  the  visitors  as  their  guests. 

Details  regarding  the  itinerary,  etc.,  will  be  fixed  at  the  proper  time. 

That  a  special  committee  representing  the  States  assembled  here  be  formed, 
together  with  their  diplomatic  representatives  accredited  to  the  United  States, 
for  the  purpose  of  taking  up  and  carrying  out  this  suggestion. 

And  as  a  complementary  measure  *  *  *  that  the  Secretary  of  the  Treas- 
ury *  *  *  appoint  a  United  States  committee  charged  with  giving  practical 
form  to  this  idea  and  to  organize  the  trip  which  is  to  result  from  it. —  (Proceed- 
ings First  Pan  American  Financial  Conference,  Washington,  1915,  p.  236.) 

This  resolution  having  been  unanimously  approved  by  the  delegates 
to  the  conference,  you  appointed  the  following  members  upon  the  gen- 
eral Latin- American  Return  Visit  Committee:  James  A.  Farrell, 
chairman,  New  York  City;  Mr.  H.  E.  Bard,  New  York  City;  Hon. 
John  Barrett,  Washington,  D.  C. ;  Mr.  D.  P.  Black,  Pittsburgh,  Pa. ; 
Mr.  John  Clausen,  San  Francisco,  Cal. ;  Mr.  D.  Y.  Cooper,  Henderson, 
N.  C. ;  Mr.  G.  A.  Davidson,  San  Diego,  Cal. ;  Hon.  Duncan  U.  Fletcher, 
Jacksonville,  Fla. ;  Mr.  Elliot  H.  Goodwin,  Washington,  D.  C. ;  Mr. 
S.  M.  Hastings,  Chicago,  111. ;  Mr.  S.  T.  Henry,  New  York,  N.  Y. ;  Mr. 
Daniel  Kelleher,  Seattle,  Wash. ;  Mr.  W.  S.  Kies,  New  York,  N.  Y. ;  Mr. 
A.  L.  Mills,  Portland,  Oreg. ;  Mr.  Charles  C.  Moore,  San  Francisco, 
Cal.;  Mr.  Walter  Parker,  New  Orleans,  La.;  Mr.  James  J.  Shirley, 
New  York,  N.  Y.;  Mr.  Willard  Straight,  New  York,  N.  Y.;  Mr. 
Edwin  Warfield,  Baltimore,  Md. ;  Mr.  Robert  H.  Patchin,  secretary, 
New  York,  N.  Y. 

The  labors  of  this  committee,  extending  over  one  year  and  con- 
sisting of  organization  of  the  several  parties  which  visited  Latin 
American  countries,  were  financially  sustained  by  voluntary  contribu- 
tions from  the  members.  No  appropriation  of  public  funds  wn? 


4  RKPOKT  CK  RETURN   VISIT  COMMITTEE. 

made  a>ul  rlx-  •'niire  expense  of  all  the  parties  was  borne  by  their 
members.  The  International  High  Commission,  Hon.  W.  G.  McAdoo, 
chairman;  Dr.  L.  S.  Howe,  secretary  general;  Dr.  C.  E.  McGuire, 
assistant  secretary  general,  cooperated  with  and  supported  the  com- 
mittee's work,  and  appreciative  acknowledgment  of  this  assistance- 
is  hereby  made. 

It  is  proper  also  to  make  due  and  sincere  acknowledgment  on  be- 
half of  this  committee,  as  well  as  on  behalf  of  the  gentlemen  compris- 
ing the  several  commissions,  of  the  deep  interest  shown  in  this  work 
and  ample  facilities  extended  for  its  performance  by  the  Departments 
of  State  and  of  Commerce,  which  furnished  letters  and  official  creden- 
tials to  all  the  parties  and  assured  the  effective  assistance  of  the 
commercial  attaches  and  consular  representatives  of  the  United 
States  throughout  Latin  America.  The  thanks  of  the  committee  are 
due  the  Navy  Department  for  the  transportation  afforded  by  the 
U.  S.  S.  Cleveland  to  the  party  visiting  the  countries  of  Central 
America,  without  which  their  itinerary  could  not  have  been  expedi- 
tiously  completed.  Also  to  the  Pan  American  Union  is  the  com- 
mittee deeply  indebted. 

At  the  outset,  it  was  contemplated  that  a  special  commission  should 
be  sent  to  each  country  with  the  exception  of  the  Republics  of  Central 
America  and  of  the  West  Indies.  One  party,  it  was  felt,  could  satis- 
factorily cover  the  West  Indian  Republics  and  another  could  be  so 
arranged  as  to  visit  the  six  Republics  of  Central  America. 

The  rapid  changes  in  business  conditions  in  the  United  States  dur- 
ing the  winter  of  1915-16  made  it  inexpedient  to  organize  parties 
large  enough  for  practical  purposes  for  each  of  the  countries  of 
South  America,  and,  consequently,  it  became  necessary  to  plan  for  a 
commission  to  visit  the  west  coast  of  South  America  and  another  to 
visit  Paraguay  and  Uruguay.  It  was  also  contemplated  that  one 
group  should  visit  both  Colombia  and  Venezuela. 

Your  committee  carefully  canvassed  the  financial  arid  industrial 
centers  of  the  United  States  for  appropriate  representatives  of  the 
great  commercial  and  financial  activities  of  the  United  States,  and 
organized  separate  commissions  as  herewith  listed: 

Argentina. — Mr.  Owen  Gathright,  vice  president,  Harbison  & 
Gathright,  Louisville,  Ky.,  chairman;  Mr.  J.  Ralph  Pickell,  Secretary 
of  the  Chicago  Council  of  Grain  Exchanges,  Chicago,  111. ;  Mr.  David 
Beecroft,  directing  editor,  The  Automobile.  Motor  Age,  etc.,  New 
York  City ;  Mr.  Charles  W.  Cheney,  Harvard  University,  Cambridge, 
Mass.,  secretary. 

Uruguay. — Mr.  Arthur  H.  Titus,  National  City  Bank,  New  York 
City,  chairman;  Mr.  William  E.  Hinchliff,  president.  Burson  Knit- 
ting Co.,  Rockford,  111.;  Mr.  Thomas  A.  Crimmins,  Crimmins  & 


REPORT  OF   RETURN    VISIT  COMMITTEE.  5 

Peirce  Co.,  Boston,  Mass.;  Mr.  Henry  L.  Janes,  engineer,  Monte- 
video, Uruguay;  Mr.  Emerson  Hinchliff.  Buenos  Aires,  Argentina. 

Brazil.— Dr.  Richard  P.  Strong,  American  International  Corpora- 
tion, New  York  City,  chairman;  Mr.  Charles  Lyon  Chandler,  South- 
ern Railway  Co.,  Chattanooga,  Tenn.,  secretary;  Mr.  W.  L.  Findley, 
lawyer,  New  York  City;  Mr.  Louis  R.  Gray,  Arbuckle  Bros.  Co.,  Rio 
de  Janeiro,  Brazil;  Mr.  Frederico  Lage,  Win.  Morris  Imbrie  &  Co., 
New  York,  N.  Y. ;  Dr.  Edward  F.  Stace,  president,  Stace,  Burroughs 
&  Co.,  Chicago,  111.;  Mr.  Thomas  W.  Streeter,  Streeter  &  Holmes, 
Boston,  Mass.;  Mr.  Arthur  C.  Weigel,  Walsh  £  Weidener  Boiler  Co., 
Chattanooga,  Tenn.;  Mr.  Henry  C.  Ulen,  president,  Ulen  Contract- 
ing Co.,  Chicago,  111. 

Peru,  Bolivia,  and  Chile. — Mr.  Ernest  H.  Wands,  American  Inter- 
national Corporation,  NewT  York  City,  chairman;  Mr.  O.  M.  Clark, 
president,  Clark  &  Wilson  Lumber  Co.,  Portland,  Oreg. ;  Mr.  A.  W. 
McLelhm,  president,  Alden  Mills  Corporation,  New  Orleans,  La. 

Central  America. — Mr.  Lamar  C.  Quintero,  general  attorney, 
tropical  divisions,  United  Fruit  Company,  New  Orleans,  La.,  chair- 
man; Mr.  Ernest  E.  Ling,  manager,  foreign  trade  department. 
National  City  Bank,  New  York  City;  Mr.  John  Clausen,  manager, 
foreign  department,  Crocker  National  Bank,  San  Francisco,  CaL; 
Mr.  J.  P.  Ripley,  J.  G.  White  &  Co.,  New  York  City ;  Mr.  Thomas 
J.  Walker,  vice  president.  First  National  Bank,  Sari  Fernando,  CaL; 
Mr.  Roger  W.  Babson,  president,  Babson  Statistical  Corporation, 
Wellesley  Hills,  Mass.;  Mr.  A.  A.  Biddle,  Philadelphia,  Pa.,  sec- 
retary. 

The  parties  contemplated  for  Venezuela  and  Colombia  and  for 
Cuba  and  the  other  Republics  of  the  West  Indies  have  not  yet  been 
organized  on  account  of  war  conditions  and  it  is  doubtful  just  when 
they  may  be  set  on  foot.  We  believe  it  unwise  further  to  delay 
publication  of  the  reports  which  have  come  to  hand,  especially  since 
the  supplementary  reports  of  the  commissions  just  alluded  to  can  be 
submitted  directly  to  your  office  whenever  the  visits  actually  shall 
have  been  made. 

The  accounts  given  of  the  various  trips  by  the  gentlemen  compris- 
ing the  respective  commissions  are  clear,  straightforward  statesments 
of  fact,  requiring  little  commentary  or  elucidation  in  a  letter. of  trans- 
mittal  such  as  this.  Your  committee,  however,  will  be  permitted, 
perhaps,  to  call  attention  to  certain  interesting  points  contained  in 
the  several  reports. 

The  report  of  the  Argentine  commission  contains,  as  do  indeed 
nearly  all  the  reports,  evidence  of  the  need  at  this  time  of  legislation 
permitting  the  producers,  manufacturers,  and  merchants  in  the 
United  States  to  combine  for  purposes  of  export  trade.  It  has 
been  all  too  true,  as  the  text  of  the  Argentine  report  puts  it,  that 


6  BEPORT  OF  KETUKN  VISIT  COMMITTEE. 

"there  are  very  many  persons  who  take  it  for  granted  that  unless 
a  particular  manufacturing  company  is  large  enough  and  powerful 
enough  to  engage  in  direct  exporting,  it  has  no  alternative  but  to 
confine  its  efforts  to  the  domestic  market."  Once  more,  the  members 
of  your  committee  feel  that  the  business  community  of  this  country 
must  be  awakened  to  the  necessity  of,  and  full  advantages  to  be 
derived  from,  such  legislation  as  the  Webb-Pomerene  bill  permitting 
cooperation  in  export  trade. 

The  report  of  the  Brazilian  commission  particularly,  and  other  re- 
ports incidentally,  have  dwelt  upon  the  need  for  more  extensive  use 
of  the  metric  system  of  weights  and  measures  in  our  foreign  trade. 
The  extent  to  which  human  ingenuity  has  equalized  Ilia  conditions 
under  which  production  and  distribution  of  merchandise  lire  car- 
ried on  everywhere  in  the  world  makes  it  necessary  for  us  to  take 
into  account  what  are  apparently  the  smallest  factors,  if  we  are  not 
merely  to  hold  our  own  with  our  competitors  but  to  get  an  increased 
share  of  the  world's  commerce,  a  share  commensurate  with  our  great 
resources  and  our  ability  fairly  and  generously  to  serve  the  a?eds  of 
the  rest  of  the  world.  Every  factor,  such  as  the  use  of  the  metric 
system  of  weights  and  measures  in  catalogues,  correspondence,  specifi- 
cations, etc.,  as  well  as  ready  and  cheerful  acceptance  of  other  re- 
quirements of  our  customers  abroad  and  of  their  Governments,  in- 
cluding those  which  have  reference  to  customs  regulations,  packing, 
the  handling  of  shipping  documents,  etc.,  must  be  given  due  attention 
by  our  manufacturers  if  they  are  to  hold  the  place  that  they  have 
gained  in  the  markets  of  the  world. 

The  commission  which  visited  the  west  coast  refers  to  the  neces- 
sity for  a  larger  number  of  consular  agents;  and  it  may  not  be 
improper  to  emphasize  the  desirability  of  increasing  our  staff  of  con- 
suls and  consular  agents  throughout  Latin  America.  Immediate 
increase  of  the  clerical  force  is  required.  The  presence  of  loyal  and 
vigorous  representatives  in  all  foreign  ports  and  trade  centers  where 
there  is  a  potential  market  for  our  goods  or  which  seem  a  likely 
source  of  products  which  our  own  industries  will  need,  is  most 
earnestly  to  be  hoped  for.  This  is  rendered  urgent  by  the  consular 
and  diplomatic  services'  heavily  increased  duties  in  administration 
of  Avar  trade  regulations. 

In  the  report  of  the  commission  which  visited  the  six  Republics  of 
Central  America  there  will  be  found  special  reference  to  the  great 
need  for  uniformity  of  commercial  law  and  fiscal  administrative 
methods  throughout  Latin  America.  Your  committee  feels  that  it 
would  not  be  doing  justice  to  the  great  cause  of  international  com- 
merce if  it  failed  to  express  its  hearty  indorsement  of  the  work  done, 
under  your  guidance,  by  the  International  High  Commission,  looking 
toward  uniform^  in  the  commercial  law  and  simplification  of  the 


REPORT  OF   RETURN   VISIT  COMMITTEE.  7 

methods  of  fiscal  administration  of  the  American  Republics  which 
was  already  well  under  way  when  the  visits  of  these  parties  to  the 
countries  of  Central  and  South  America  were  made;  and  which, 
of  course,  has  since  been  carried  to  a  more  advanced  stage.  Only 
through  the  wider  acquaintance  of  the  leaders  in  finance  and  industry 
in  all  portions  of  the  hemisphere  can  the  groundwork  be  laid  for  a 
lasting  structure  of  friendly  social  and  economic  relations,  and  such 
a  foundation  has  been  laid  and  will  from  time  to  time  be  strength- 
ened by  Pan  American  financial  conferences  and  parties  organized 
to  visit  our  sister  Republics.  Upon  this  foundation  must  be  built  the 
solid  superstructure  of  study  and  scientific  analysis  of  the  laws  and 
administrative  systems  of  all  the  Republics,  study  and  analysis  which 
will  result  in  substantial  uniformity  and  harmony  of  administrative 
methods  and  legal  processes.  This  is  the  work  which  the  Interna- 
tional High  Commission  has  carried  on  and  must  continue  to  carry 
on  with  success.  We  especially  commend  its  effort  to  secure  uni- 
form methods  of  classification  of  merchandise  for  statistical  purposes 
as  the  basis  of  a  later  effort  to  make  uniform  the  customs  tariffs  of 
this  hemisphere. 

The  mutual  interests  of  the  United  States  and  the  sister  Republics 
were  apparent  to  all  visiting  parties,  but  with  the  entrance  of  the 
United  States  in  the  war  Pan  Americanism  has  become  an  essential 
element  of  the  great  task  of  winning  the  war.  Nine  Governments 
of  Latin  America  have  either  declared  war  upon  Germany,  or  have 
broken  off  diplomatic  relations.  There  is  no  country  in  Latin  America 
which  does  not  supply  some  material  required  in  the  production  of 
supplies  and  munitions  of  war,  and  some  foodstuff  necessary  to  sus- 
tain the  army  or  the  belligerent  population  behind  the  army.  The 
friendly  commercial  relations  developed  between  the  United  States 
and  sister  Republics  before  the  war,  and  the  market  offered  here  for 
Latin-American  produce,  created  channels  in  commerce  through 
which  is  now  flowing  a  steadily  increasing  stream  of  materials  in- 
dispensable to  our  life  and  industry  and  to  our  part  in  the  present 
conflict.  The  proportion  of  Latin- American  produce  directly  im- 
ported by  Europe  has  decreased.  The  exports  from  the  United  States 
to  Latin- American  countries  have  greatly  expanded  both  in  volume 
and  value.  The  natural  economic  reciprocity  of  the  United  States 
and  the  other  Republics  is  emphasized  by  the  fact  that  the  United 
States  offers  the  largest  and  most  profitable  market  for  their  produce, 
while  they  can  now  obtain  nowhere  else  much  of  the  manufactured 
merchandise  necessary  to  their  development.  In  fact,  they  must  have 
many  American  manufactures  in  order  to  carry  on  their  production 
of  nitrates,  manganese,  iron  and  copper  ore,  rubber,  tin.  wool,  hides, 
and  foodstuffs,  which  the  United  States  and  the  nations  with  which 
we  are  associated  in  the  war  now  so  urgently  require. 


8  REPORT  OF  RETURN    VISIT  COMMITTEE. 

One  of  the  most  pressing  problems  for  the  United  States  is  to  ex- 
pand, as  a  war  measure,  the  production  necessary  to  permit  increased 
exportation  to  Latin  America.  This  will  powerfully  support  our 
financial  and  productive  resources  for  the  successful  prosecution  of 
the  war. 

The  recommendations  of  the  return  visit  parties,  coinciding  as 
they  do  with  those  of  other  organizations  would,  if  carried  into  ef- 
fect before  1917,  have  strengthened  the  United  States  for  its  part  in 
the  war.  They  should,  through  national  policy,  be  accomplished 
without  delay.  Practical  Pan  Americanism  calls  for  a  larger  degree 
of  cooperation  than  hitherto  has  been  possible. 

All  the  parties  have  emphasized  the  necessity  of  improved  facili- 
ties for  transportation.  Generally  speaking,  the  tonnage  available 
for  exports  has  been  sufficient  for  the  traffic  because  the  total  tonnage 
of  imports  greatly  exceeds  that  of  exports;  and  vessels  returning  to 
South  America  for  wool,  coffee,  nitrate,  copper  ore.  sugar,  etc.,  huve 
afforded  ample  space. 

During  the  period  of  our  neutrality  it  was  strikingly  apparent 
that  the  commerce  of  the  United  States  with  Latin  American 
Republics  was  at  a  disadvantage  because  it  was  so  largely  de- 
pendent upon  steamers  under  European  flags,  the  service  of  which 
was  rapidly  depleted  by  governmental  requisition.  The  officials  of 
all  countries  visited  emphasized  their  desire  for  direct  and  more  fre- 
quent steamship  communication  with  the  United  States.  The  various 
Governments,  both  in  the  Pan  American  Financial  Conference 
and  otherwise,  have  indicated  their  desire  to  assist  in  a  practical 
manner  the  establishment  of  direct  services.  The  problem  is  not 
alone  one  of  steamship  services  under  the  United  States  flag.  Several 
of  our  neighbors  have  considerable  merchant  fleets  and  some  of  them 
have  pursued  constructive  policies  for  strengthening  their  commercial 
carrying  power. 

The  importance  of  investment  of  capital  in  the  development  of 
Latin  American  resources  by  the  business  interests  in  the  United 
States  is  apparent.  The  progress  of  Mexico,  Cuba,  the  Republics  of 
Central  America,  and  the  northern  part  of  South  America  is  in  no 
small  degree  due  to  American  investments,  and  the  predominance 
of  American  merchandise  in  the  import  trade  of  those  nations  bears 
a  close  relation  to  these  investments.  Farther  south  the  proportion 
of  investments  by  business  interests  in  the  United  States  is  less, 
but  it  has  been  steadily  increasing  during  the  last  three  years  and, 
for  the  first  time,  certain  of  the  larger  South  American  Govern- 
ments have  borrowed  extensively  in  the  United  States. 

During  the  war  the  United  States  will  probably  not  be  in  a  posi- 
tion to  make  large  investments  for  industrial  purposes  in  Latin 
American  countries,  but  it  should  be  remembered  that  they  are  de- 


REPORT   OF   RETURN    VISIT  COMMITTEE.  9 

pendent  upon  foreign  capital  for  development  and  that  their  ability 
to  serve  the  commercial  needs  of  more  fully  developed  countries  is 
in  direct  proportion  to  the  extent  that  the  financial  resources  of 
such  countries  are  available  to  them. 

The  responsiveness  of  the  commerce,  and  indeed  of  the  whole 
economic  situation,  of  the  countries  of  Latin  America  to  the 
shock  of  world  war,  is  dwelt  upon  by  all  the  visitors  whose  impres- 
sions are  here  gathered,  and  once  more  it  is  made  clear  that  the 
world's  commerce  is  a  delicate  fabric  wholly  unified  and  readily 
affected  throughout  its  extent  by  a  disturbance  of  any  portion  of  it. 
When  we  have  learned  how  closely  related  to  the  prosperity  and  well 
being  of  our  domestic  commerce  and,  indeed,  of  our  domestic -affairs 
and  government,  is  the  trade  and  body  of  commercial  relations 
which  we  maintain  with  the  other  nations'  of  the  world,  we  will 
realize  how  necessary  it  is  for  every  producer  and  manufacturer  on 
no  matter  how  small  a  scale  to  keep  himself  fully  informed  of  the 
principles  and  tendencies  of  international  commerce.  When  we  have 
come  to  know  how  much  the  relations  existing  between  our  country 
and  our  neighbors  in  this  hemisphere  or  the  other  will  affect 
vitally  and  immediately  the  entire  structure  of  our  industry  and 
trade,  we  shall  take  more  intelligent  and  vigilant  care  to  see  that 
those  relations  are  upon  the  best  possible  basis  than  we  have  ever 
done  before. 

The  committee  feels,  Mr.  Secretary,  that  the  resolution  of  the  Pan 
American  Financial  Conference  has  substantially  been  carried  out, 
and  that  the  process  has  been  an  instructive  and  valuable  one, 
whereof  the  record  is  now  submitted  for  such  disposition  as  you  may 
care  to  make;  and,  on  behalf  of  my  colleagues,  I  extend  the  sincere 
thanks  of  our  committee  for  the  stimulus  and  assistance  that  you 
have  given,  and  I  ask  that  the  committee  be  discharged. 
Respectfully, 

JAMES  A.  FARRELL,  Chairman. 
ROBERT   H.    PATCHIN,   Secretary. 


The  Honorable 

The  SECRETARY  OF  THE  TREASURY, 

Washington,  D.  C. 


REPORT  OF  FINANCIAL  AND  COMMERCIAL  COMMISSION 

TO  ARGENTINA. 

Hon.  W.  G.  McADoo, 

Secretary  of  the  Treasury, 

Washington,  D.  C. 

SIR:  The  commission  appointed  by  you  to  visit  Argentina,  in 
response  to  the  invitation  extended  to  the  business  men  of  the  United 
States  by  the  Latin  American  delegates  to  the  First  Pan  American 
Financial  Conference  in  Washington,  May  25-20,  1915,  consisted 
of  the  following :  Mr.  Owen  Gathright,  vice  president  of  Harbison  & 
Gathright,  wholesale  leather  and  saddlery  merchants,  Louisville, 
Ky.,  chairman;  Mr.  J.  Ralph  Pickell,  secretary  of  the  Chicago 
Council  of  Grain  Exchanges,  Chicago,  111.;  Mr.  David  Beecroft, 
directing  editor  of  The  Automobile,  Motor  Age,  Motor  World,  Motor 
Print,  The  Commercial  Vehicle,  and  other  periodicals  devoted  to  the 
automobile  industry;  and  Mr.  Charles  W.  Cheney,  of  Harvard  Uni- 
versity, secretary  of  the  commission. 

In  order  to  facilitate  its  study  of  commercial  and  industrial  con- 
ditions in  Argentina,  Dr.  Albert  Hale,  commercial  attache  of  the 
United  States  Embassy  at  Buenos  Aires,  was  associated  with  the 
commission. 

The  party  sailed  from  New  York  on  April  29,  1916,  arriving  in 
Buenos  Aires  on  May  22.  On  May  29  the  commission  adopted  the 
somewhat  unusual  course  of  visiting  the  interior  for  information. 
The  itinerary  included  the  important  commercial  cities  of  Rosario 
and  Santa  Fe  on  the  River  Parana,  the  educational  and  industrial 
center  at  Cordoba,  and  the  sugar-growing  region  about  Tucuman. 
This  route  also  passed  through  some  of  the  very  fine  agricultural 
and  cattle-raising  country  on  which  the  prosperity  of  the  nation  is 
founded. 

The  official  visit  of  the  commission  concluded  on  June  10  with  a 
dinner  given  in  its  honor  by  the  United  States  Ambassador  and  Mrs. 
Stimson,  at  which  prominent  Argentine  officials  were  present.  The 
members  returned  to  the  United  States  at  intervals  thereafter,  as  soon 
as  each  had  completed  his  special  investigation. 

The  general  report  of  the  committee  follows.  For  much  of  the 
information  contained  in  it,  the  members  of  the  committee  would 

n 


12  REPORT   ON   ARGENTINA. 

express  grateful  acknowledgement  to  Prof.  P.  T.  Cherington  and 
Dr.  Julius  Klein,  of  the  Harvard  University  School  of  Business  Ad- 
ministration. Following  the  general  report  of  the  committee  will  be 
found  some  notes  and  special  observations  prepared  by  Mr.  Gath- 
right.  Similar  special  reports  were  prepared  by  Messrs.  Beecroft 
and  Pickell.  Mr.  Beecroft's  report  upon  the  automobile  market  has 
been  published  by  the  Department  of  Commerce  in  Miscellaneous 
Series,  No.  62,  which  may  be  obtained  from  the  superintendent  of 
documents,  Government  Printing  Office,  Washington.  Mr.  Pickell's 
report  upon  the  market  for  agricultural  machinery,  and  the  extent 
and  character  of  the  Argentine  grain  trade  has  been  published  pri- 
vately in  an  attractive  booklet  by  the  J.  Rosenbaum  Grain  Co.,  of 
Chicago. 

I.    DESCRIPTION   AND  RESOURCES  Of  ARGENTINA. 

The  Argentine  Republic  embraces  an  area  of  over  1,000.000  square 
miles,  roughly  equivalent  to  that  part  of  the  United  States  east  of  the 
Mississippi  River.  It  covers  35°  of  longitude,  or  a  range  equal  to 
that  between  Cuba  and  Labrador.  But  the  pampa,  which  is  the  most 
fertile  and  commercially  important  part  of  the  country,  is  included 
between  the  latitudes  of  30°  and  40°  S.,  while  Buenos  Aires,  the 
capital,  corresponds  roughly  to  the  latitude  of  Charleston.  S.  C.»  or 
Los  Angeles.  Cal.  At  this  point  the  Republic  has  a  width  of  about 
700  miles  to  the  crest  of  the  Andes,  with  the  Pacific  Ocean  only  100 
miles  beyond.  For  some  200  miles  east  of  the  mountains  the  rainfall 
is  insufficient  to  support  crops  and  irrigation  has  been  employed  to 
some  extent.  The  remaining  two-thirds  of  the  pampa  contains  some 
of  the  finest  land  in  the  world,  and  it  is  here  that  the  greatest  devel- 
opment has  taken  place. 

The  population  of  Argentina  is  now  nearly  8,000,000,  approxi- 
mately that  of  Canada.  It  is  doubling  about  every  20  years  as  new 
regions  are  opened  up  to  settlement  and  communication.  Indians 
are  found  only  in  the  remote  provinces,  while  negroes  are  scarcely 
ever  to  be  seen.  It  is  probable,  in  fact,  that  the  proportion  of  white 
people  is  larger  than  in  our  own  country. 

Buenos  Aires,  a  clean,  cosmopolitan,  and  enterprising  city  of  about 
1,500,000  inhabitants,  is  7,000  miles  distant  from  New  York  and  is 
reached  by  direct  passenger  steamers  of  10,000  tons  in  23  d&ys.  Owing 
to  the  marvelous  development  of  the  interior,  additional  deep-water 
ports  have  been  constructed  at  Bahia  Blanca  (on  the  coast  500  miles 
south  of  Buenos  Aires),  Rosario  (200  miles  up  the  River  Parana  from 
the  capital),  and  Santa  Fe  (100  miles  above  Rosario).  All  these 
ports  enjoy  the  most  modern  facilities,  including  docks,  warehouses, 
loading  machinery,  and  direct  railroad  connection.  The  chief  im- 


REPORT   ON   ARGENTINA.  13 

portance  of  the  first  two  is  for  the  exportation  of  grain,  and  of  the 
last  for  the  exportation  of  forest  products,  while  Buenos  Aires  re- 
mains the  leading  center  for  importation.  In  addition  to  these  large 
ports,  there  are  numerous  small  towns,  both  on  the  coast  and  on 
the  Rivers  Parana  and  Uruguay,  which  are  accessible  by  steamers 
discharging  into  lighters  as  inducement  offers,  and  regularly  by 
transhipment  at  the  more  important  ports  to  coastwise  or  river 
steamers.  A  point  to  be  remembered  is  that,  since  almost  all  of 
South  America  lies  to  the  east  of  the  United  States,  the  ports  on  the 
English  Channel  are  to  all  intents  and  purposes  as  near  to  Buenos 
Aires  as  New  York  or  Boston. 

Until  recently  the  railway  system  of  Argentina  has  been  growing 
very  rapidly.  There  are  now  over  22,000  miles  of  line  of  meter 
gauge  (3  feet  3  inches),  standard  gauge  (4  feet  8J  inches),  and  broad 
gauge  (5  feet  6  inches),  the  last  of  which  comprises  more  than  half 
the  total.  Argentina  thus  has  a  greater  railway  mileage  than  any 
other  country  south  of  the  equator.  The  service  is  very  good,  and 
no  discomforts  are  to  be  expected  in  traveling.  Hotels  in  the  cities 
of  commercial  importance  will  be  found  entirely  satisfactory. 

The  leading  industry  in  Argentina  is  the  growing  of  cereals,  chiefly 
wheat,  corn,  and  linseed,  for  which  her  broad  fertile  plains  are  ad- 
mirably adapted.  The  country  now  ranks  with  Canada  and  Russia 
as  one  of  the  granaries  of  the  world.  Next  in  importance  is  the  live- 
stock industry,  in  which  Argentina  has  taken  the  place  of  the  United 
States  as  one  of  the  leading  sources  of  the  world's  supply.  Some 
of  this  development  is  due  to  the  erection  of  facilities  for  slaughter- 
ing and  refrigerating  for  the  European  market  by  American  packers, 
who  were  suffering  from  the  decreasing  supply  of  cattle  in  this 
country.  A  remarkable  development  which  has  occurred  recently 
has  been  the  fact  that  live-stock  products  have  displaced  agricultural 
products  as  the  chief  exports  of  the  country.  This  is  due  to  the 
bumper  crops  in  the  United  States  and  Canada  in  1915  and  to  the 
shortage  of  shipping,  with  the  result  that  comparatively  little  grain 
was  bought  from  Argentina,  while  the  demands  of  the  outside  world 
for  her  hides,  wool,  and  frozen  meats  were  unchecked.  In  1916,  on 
the  other  hand,  both  the  United  States  and  Argentina  were  suffering 
from  extremely  short  crops.  The  third  important  group  of  exports 
is  forest  products,  which  consist  chiefly  of  the  extract  of  quebracho, 
obtained  from  the  great  forests  north  of  Santa  Fe  and  sent  abroad 
for  use  in  tanning. 

In  addition  to  these  staple  industries,  figuring  so  prominently  in 
the  export  trade,  are  other  activities  which  limit  themselves  to  sup- 
plying the  home  market.  Chief  among  them  are  the  sugar  industry 


14  REPORT  ON  ARGENTINA. 

of  Tucuman  and  Salta,  and  the  wine  industry  of  Mendoza.  There 
is  some  development  of  water  power,  especially  at  Cordoba,  where 
flour  mills  and  shoe  factories  are  operated  by  electricity.  The  fact 
that  practically  all  the  coal  used  in  the  country  had  been,  before  the 
war,  largely  imported  from  Great  Britain,  and  is  now  imported 
from  the  United  States,  prevented  the  growth  of  manufacturing  to 
any  great  extent,  and  probably  will  continue  to  do  so.  This  lack  of 
coal  also  explains  the  high  rates  on  the  railways,  as  well  as  the  fact 
that  the  houses  are  not  heated  in  winter.  Recently,  petroleum  has 
been  discovered  in  the  remote  southern  part  of  the  country,  but  it  is 
too  early  to  predict  how  great  its  effect  will  be. 

The  following  figures,  taken  from  Argentina  official  reports  and 
converted  into  United  States  dollars  at  the  rate  of  96.5  cents  for  a 
gold  peso,  will  give  some  idea  of  the  effect  of  the  war  on  the  foreign 
commerce  of  Argentina : 


Year. 

Exports. 

Imports. 

Dec.  31,1913  

$466,581,888 

$406  605  203 

Dec.  31,  1914  

337  030  246 

262  304  274 

Dec.  31  1915 

538  740  820 

218  %1  487 

Dec.  31,  1916  

453  911  952 

211  343  535 

These  figures  indicate  that  Argentina  did  not  escape  the  world- wide 
paralysis  of  trade  immediately  following  the  decLanition  of  war  in 
Europe.  In  common  with  the  rest  of  the  world,  exports  were 
checked  by  the  uncertainty  as  to  delivery  and  payment,  and  con- 
sumption of  both  domestic  and  imported  goods  was  reduced  to  bare 
necessities.  The  high  figure  for  exports  in  1915  is  stated  to  be  due 
to  exceptionally  high  prices,  especially  for  meat  products,  and  not  to 
an  increase  in  the  volume  of  exports.  The  intensification  of  the 
shipping  famine,  with  a  consequent  reduction  in  volurne_j  explains 
the  falling  off  in  1916,  though  the  figures  for  that  year  remain  ap- 
proximately equal  to  those  for  1913.  This  condition  is  reflected,  as 
already  explained,  in  the  decrease  of  49  per  cent,  or  nearly  half,  in 
the  exportation  of  agricultural  products  during  the  first  half  year 
(the  latest  period  for  which  detailed  figures  are  available).  Mean- 
while, the  decline  in  imports,  very  sharp  at  first,  is  being  gradually 
checked.  But  a  change  in  the  other  direction  is  not  to  be  expected 
until  new  construction  is  resumed  throughout  the  country,  and  that 
depends  to  a  great  extent  on  the  investment  of  foreign  capital — a 
subject  which  will  be  discussed  farther  on.  It  is  important  to  note 
the  trend  of  these  import  figures,  however,  in  order  to  understand 
the  remarkable  fluctuations  in  Argentina's  imports  from  the  United 
States. 


REPORT  ON  ARGENTINA.  15 

The  changes  in  Argentina's  trade  with  this  country  during  the 
first  two  and  a  half  years  of  the  war  are  shown  by  the  following 
table,  based  on  figures  in  the  Statistical  Abstract  of  the  United 
States.  Since  these  figures  are  differently  compiled,  and  cover  a 
different  period  from  those  of  the  Argentine  Government  already 
given,  any  comparisons  indicating  percentages  will  be  only  approxi- 
mately correct.  The  reason  for  using  these  different  sets  of  figures 
is  simply  to  show  the  latest  statistics  available  in  each  group^  The 
figures  for  Argentina's  trade  with  the  United  States  follow : 


Years. 

Exports  to 
United  States. 

Imports  from 
United  States. 

June  30,  1913  

$26,  863,  732 

$52,894  834 

June  30  1914 

45  123  988 

45  179  089 

June  30  1915 

73  766  258 

32  549  606 

June  30  1916 

112  512  420 

65  993  611 

Dec.31,1916'  

116,292,647 

76,  874,  254 

In  her  trade  with  this  country  Argentina's  exports  have  shown  a 
steady  and  very  remarkable  growth,  having  increased  more  than 
fourfold.  Her  imports,  on  the  other  hand,  at  first  showed  a  very 
striking  falling  off,  being  in  the  fiscal  year  1915  a  full  $20,000,000  less 
than  two  years  previously.  The  figures  for  her  total  imports  go  far 
toward  explaining  this  change;  for,  when  consumption  was  re- 
stricted, there  was  naturally  a  decrease  in  purchases  from  the  United 
States,  as  well  as  from  other  countries.  Indeed,  were  it  not  for  the 
fact  that  many  new  lines  of  American  goods  have  been  introduced 
during  this  period,  a  still  greater  decrease  would  have  been  shown. 
Lately  this  latter  influence  has  been  overcoming  the  former,  so  that 
imports  from  the  United  States  are  now  increasing  rapidly,  while 
total  imports  continue  to  decline.  Arranged  in  descending  order, 
the  new  lines,  and  those  in  which  an  increase  is  shown,  include  coal, 
iron  and  steel  products,  cotton  and  cotton  goods,  oils,  paper,  glass, 
cleaned  rice,  malt,  sacks  for  packing  meat,  spare  parts  for  vehicles, 
and  woolen  cloths.  The  lines  in  which  Argentina  has  enlarged  her 
exports  to  us  are  wool,  hides,  frozen  meat,  and  linseed.  Much  of  this 
increase  represents  goods  which  formerly  reached  this  country  from 
Argentina  via  England  or  some  other  point  of  transhipment.  The 
latest  figures  available  (calendar  year  1916)  show  that  Argentina's 
exports  to  us  have  increased  334  per  cent  over  the  fiscal  year  1913, 
while  her  imports  from  us  have  increased  only  45  per  cent.  We  are 
thus  in  a  more  favorable  position  to  increase  our  sales  to  Argentina 
than  before  the  war,  as  any  increase  now  would  tend  to  restore  the 
equilibrium  rather  than  to  upset  it. 

1  [The  figures  for  1917  may  be  interesting:  Exports  to  United  States,  $178.245,833;  im- 
ports from  the  United  States.  $107,041,905.— Editor.] 


16  REPORT   ON   ARGENTINA. 

II.    INDIRECT   METHODS  OF  EXPORTING  TO  ARGENTINA. 

It  is  not  the  purpose  of  this  report  to  enter  into  a  detailed  discus- 
sion of  indirect  methods  of  exporting.  Yet  there  are  very  many 
persons  who  take  it  for  granted  that  unless  a  particular  manufac- 
turing company  is  large  enough  and  powerful  enough  to  engage  in 
direct  exporting,  it  has  no  alternative  but  to  confine  its  efforts  to  the 
domestic  market.  It  becomes  necessary,  therefore,  to  point  out  that 
there  are  many  strong  houses  in  New  York  and  other  seaports  of  the 
United  States  organized  expressly  to  take  care  of  such  foreign 
business. 

Take,  for  instance,  the  export  commission  house.  In  its  pure  form 
such  a  house  merely  places  orders  sent  to  it  by  its  clients  abroad 
and  receives  from  them  a  commission  for  so  doing.  But  most  of  the 
export  commission  houses  now  engage  in  a  merchant  business,  buying 
and  selling  on  their  own  account.  So  far  as  the  manufacturer  is 
concerned,  there  is  very  little  difference  between  selling  goods  to  an 
export  house  in  Newr  York  for  consumption  in  Argentina  and  selling 
them  to  a  wholesaler  in  New  York  for  consumption  in  Connecticut. 
In  either  case  the  manufacturer  supplies  the  goods  ordered  in  the 
best  condition  he  knows  how  and  receives  his  money  immediately. 
The  export  house  or  the  wholesaler  finds  the  customers,  attends  to 
shipment,  and  assumes  the  credit  risk.  This  system  of  selling  abroad 
has  the  same  advantages,  disadvantages,  and  obligations  as  dis- 
tributing through  wholesalers  at  home,  and,  as  any  manufacturer 
knows  what  they  are,  further  consideration  of  them  here  is  un- 
necessary. 

,  If  the  manufacturer  is  located  at  an  inland  point  and  feels  the 
need  of  some  one  on  the  spot  to  represent  him  in  his  dealings  with 
such  houses  as  those  just  mentioned,  he  has  at  his  disposal  in  New 
York  a  large  number  of  so-called  manufacturers'  export  agents. 
These  men,  or  firms,  do  business  on  terms  ranging  all  the  way  from  a 
consignment  to  a  merchant  basis,  and  some  one  can  usually  be  found 
whose  terms  will  be  satisfactory  to  the  manufacturer.  When  that  is 
done,  an  exclusive  agency  agreement  for  the  exportation  of  the  goods 
is  concluded  between  the  parties.  It  need  hardly  be  mentioned  that 
such  a  step  presupposes  as  careful  consideration  and  choosing  as  the 
manufacturer  habitually  gives  to  similar  arrangements  for  his  purely 
domestic  business.  One  of  the  chief  advantages  of  the  manufac- 
turers' export  agent  is  the  fact  that  he  is  in  a  position  to  reach  the 
large  number  of  foreign  buyers  who  come  to  New  York  to  select  the 
goods  they  desire. 

Many  manufacturers  doing  an  indirect  export  business  have  found 
it  profitable  to  assist  these  distributing  agencies  by  themselves  stimu- 


REPORT  ON    ARGENTINA.  17 

lating  the  demand  for  their  goods  in  the  territory  to  be  exploited. 
This  can  be  done  in  three  ways,  the  best  results  being  obtained  when 
all  three  are  used  together : 

(1)  Advertising. — Success  here  requires  some  idea  of  what  argu- 
ments will  make  the  strongest  appeal  to  buyers  in  Argentina.    If  no 
one  is  available  with  that  knowledge,  the  New  York  distributing 
agency  which  the  manufacturer  is  seeking  to  help  may  be  consulted 
for  advice. 

(2)  Correspondence. — Unless  the  person  or  firm   addressed  has 
indicated  a  willingness  to  use  English,  all  correspondence  should  be 
in  Spanish.    If  there  is  not  enough  of  it  to  justify  the  employment 
of  a  Spanish-speaking  person  in  the  office,  the  correspondence  can  be 
translated  by  some  reliable  person  recommended  by  the  distributing 
agency.    It  is  important  that  the  sense,  rather  than  the  words,  of  the 
letter  be  rendered.    These  considerations  apply  with  equal  force  to 
circular  letters  and  catalogues. 

(3)  Travelers. — The  use  of  travelers  in  Argentina  to  stimulate 
demand  may  be  the  most  effective,  as  well  as  the  most  expensive, 
method  of  accomplishing  that  end.     On  account  of  the  high  cost, 
several  manufacturers  often  combine  to  have  one  traveler  promote 
their  goods.    The  advantages  and  disadvantages  of  such  a  plan  will 
be  discussecj  in  connection  with  salesmen  in  direct  exporting.    Where 
the  object  is  not  to  make  sales  but  to  stimulate  demand,  as  in  this 
case,  care  must  be  taken  to  refer  all  inquiries  to  the  regular  channels 
for  distribution. 

When  it  comes  to  actually  shipping  the  goods  the  American  manu- 
facturer who  is  not  in  the  habit  of  doing  it  immediately  runs  into 
difficulties.  This  is  where  the  services  of  the  foreign  freight  for- 
warder may  be  found  useful.  Most  of  the  domestic  express  com- 
panies have  well-equipped  departments  for  this  purpose.  For  a  small 
commission  they  will  supply  information  as  to  packing,  marking, 
and  billing ;  will  take  charge  of  the  shipment  at  seaboard ;  and  will  see 
that  it  is  delivered  in  good  condition  to  the  Argentine  buyer.  It  goes 
without  saying  that  where  a  foreign  freight  forwarder  is  employed 
for  this  purpose  all  instructions  as  to  packing,  marking,  and  billing 
must  be  faithfully  carried  out ;  the  only  reason  for  taking  advantage 
of  this  service  is  the  fact  that  the  forwarder  is  familiar  with  the 
details  of  shipment  to  Argentina,  while  the  manufacturer  is  not. 
The  same  applies  to  instructions  given  by  a  New  York  export  house. 

III.  DIRECT  METHODS  OF  EXPORTING  TO  ARGENTINA. 

The  chief  advantage  of  direct  exporting  over  indirect  is  that  it 
brings  the  center  of  interest  nearer  the  buyer  and  consequently  tends 
1003—18- — 2 


18  REPORT   ON    ARGENTINA. 

to  give  greater  satisfaction  and  to  increase  sales.  Its  disadvantages 
are  its  greater  cost  and  the  fact  that  a  few  serious  blunders  may 
permanently  ruin  the  market  for  the  goods  sought  to  be  sold.  This 
applies  to  the  exportation  of  manufactured  products  the  world  over, 
not  alone  to  Argentina. 

The  first  possibility  for  the  manufacturer  is  to  have  his  agents  in 
Buenos  Aires,  rather  than  in  New  York.  This  may  be  done  on  either 
a  commission  or  a  merchant  basis.  If  an  Argentine  house  is  chosen, 
care  should  be  taken  that  it  is  not  also  the  agent  for  a  competing  line 
of  goods  manufactured  in  its  home  country.  In  that  case,  of  course, 
the  American  manufacturer  would  be  foolish  to  expect  his  goods  to 
be  pushed  as  vigorously  as  those  of  his  competitor,  a  situation  best 
guarded  against  by  means  of  an  exclusive  agency  contract.  When  the 
manufacturer,  after  very  careful  consideration,  has  finally  arranged 
with  the  importing  house — either  European  or  Argentine — which  is 
to  represent  him,  he  should  leave  to  it  the  filling  of  orders  from  inte- 
rior points.  This  does  not  prevent  his  helping  to  stimulate  the 
demand  in  any  of  the  ways  already  mentioned. 

If  the  prospective  business  seems  to  warrant  the  expense,  the 
manufacturer  may  establish  a  branch  office  in  Buenos  Aires.  Such  a 
branch  would  sell  to  the  same  people,  and  probably  on  the  same 
terms,  as  would  the  agent  just  discussed;  but  it  would  have  a  closer 
relation  to  the  home  office,  and  could  more  effectively  carry  out  the 
policies  of  the  company.  As  it  would  not  have  other  lines  with  an 
established  sale  to  swell  receipts,  it  would  usually  be  a  losing  venture 
for  a  period  of  years,  and  should  not  be  undertaken  unless  the  pros- 
pects have  been  found  on  thorough  investigation  to  be  very  good. 

Finally,  traveling  salesmen,  reporting  direct  to  the  home  office  and 
taking  orders  from  wholesalers  or  retailers  throughout  Argentina, 
may  be  employed.  The  following  considerations  with  respect  to 
salesmen  apply  equally  to  anyone  representing  the  manufacturer  in 
Argentina,  viz,  the  staff  of  a  branch  office,  the  importing  house 
chosen  as  agent,  or  the  travelers  whose  mission  is  merely  to  stimulate 
orders  to  be  filled  through  indirect  channels. 

(1)  The  manufacturer  comes  into  personal  contact  with  his  cus- 
tomers only  through  his  representatives.  If  they  are  the  right  kind, 
the  results  will  probably  appear  in  a  satisfactory,  if  not  a  surprising, 
volume  of  sales;  if  they  are  the  wrong  kind,  the  manufacturer's 
reputation  may  be  ruined  for  a  generation.  These  things  are  im- 
portant in  the  United  States;  they  are  even  more  important  in 
Argentina.  The  manufacturer  will  suffer  in  dollars  and  cents  if  he 
sends  a  representative  who  can  not  be  introduced  into  polite  society, 
who  adopts  a  patronizing  attitude  toward  his  customers,  or  who  in- 
dulges in  sharp  practice  under  the  impression  that  he  is  benefiting 
his  principal. 


REPOItT  ON   ARGENTINA.  19 

(2)  In  order  to  accomplish  anything  worth  while,  there  must  be 
the  fullest  confidence  on  both  sides,  which  implies  that  when  the  rep- 
resentative makes  recommendations  looking  toward  any  changes  in 
policy,  or  even  in  the  goods  themselves,  the  manufacturer  should  be 
very  sure  of  his  ground  before  turning  them  down.    For  it  may  be 
assumed  that  any  manufacturer  who  has  gone  so  far  as  to  choose 
or  send  a  representative  for  the  Argentine  market  is  seriously  anxious 
to  succeed  there  and  is  willing  to  make  any  reasonable  changes  to 
accomplish  that  end.    From  this  ma}?-  be  seen  the  extreme  importance 
of  chocking  a  representative  who  can  be  trusted  to  the  fullest  extent, 
and  then  giving  him  a  chance  to  do  his  best  work  without  being 
molested   by   home  advice   from   anyone   whose  experience   of  the 
Argentine  is  less  extensive  than  his  own. 

(3)  Another  quality  that  is  absolutely  essential  in  any  repre- 
sentative,  whether   agent,   salesman,   or  traveler,   is   thorough   ac- 
quaintance with  both  the  goods  and  the  market.    It  is  a  generally 
accepted  principle  at  home  that  a  satisfied  customer  is  the  best  ad- 
vertisement, and  the  principle  is  every  bit  as  true  in  Argentina.    It 
does  not  tend  to  satisfy  a  customer  to  sell  him  an  article  which  is 
physically  incapable  of  fulfilling  the  ends  to  which  he  proposes  to 
put  it:  nor  does  trying  to  sell  him  an  article  totally  unfit  for  use  in 
his  country.     Several  cases  have  been  brought  to  our  attention  of 
importers  who  have  come  all  the  way  from  Argentina  to  procure 
goods  which  they  knew  were  manufactured  by  American  firms,  but 
which  could  not  be  obtained  through  the  accredited  representatives 
of  those  firms  in  their  country.    Obviously,  they  would  not  take  this 
trouble  if  corresponding  goods  could,  for  the  time  being,  be  obtained 
from  any  other  source.    While  a  knowledge  of  the  Spanish  language 
is  of  very  great  importance,  it  can  not  take  the  place  of  familiarity 
with  the  goods  and  the  market. 

(4)  Once  a  manufacturer  has  his  representatives  in  Argentina,  it 
becomes  necessary  for  them  to  report  to  someone  in  the  home  office 
who  is  in  a  position  to  coordinate  the  demands  of  selling  with  those 
of  production.  It  has  already  been  pointed  out  that  it  will  require 
one  of  the  very  best  men  obtainable  to  do  full  justice  to  the  Argentine 
market  as  a  representative  on  the  spot.  Such  being  the  case,  it  is 
extremely  important  that  his  judgment  be  not  overruled  by  anyone 
in  the  home  office  who  knows  less  about  selling  in  Argentina  than  he 
does.  The  responsible  person  at  home  should  certainly  be  an  officer 
of  the  company,  and  should,  if  possible,  actually  have  visited  South 
America.  Of  course,  not  all  firms  will  be  able  to  start  with  any  such 
system  as  this,  but  they  should  nevertheless  attempt  to  reach  such  a 
situation  at  the  earliest  possible  date  in  order  to  obtain  the  best 
possible  results. 


20  REPORT  ON  ARGENTINA. 

The  decision  to  embark  in  direct  exporting  involves  certain  factors 
with  which  the  manufacturer  is  but  little  concerned  in  indirect  ex- 
porting. In  the  first  place,  it  is  fatal  to  expect  success  if  orders  from 
the  representative  are  ever  turned  down  on  the  ground  that  the  mill 
is  already  sold  up  on  home  orders.  No  agent  or  salesman  can  build 
up  a  permanently  remunerative  trade  for  an  article  if  he  runs  the 
risk  of  having  his  repeat  orders  refused  whenever  there  is  a  boom  in 
the  home  market.  In  other  words,  a  concern  engaging  in  direct 
exporting  must  give  up  the  idea  once  and  for  all  that  Argentina  is 
a  convenient  place  to  dispose  of  surplus  production.  Certainly,  an 
American  business  man  who  had  gone  to  the  trouble  and  expense 
of  creating  a  market  for  a  particular  brand  of  foreign  goods  and 
then  found  his  repeat  orders  arbitrarily  refused,  would  never  again 
push  those  goods.  This  is  one  of  the  things  to  which  the  manu- 
facturer who  wants  the  trade  must  make  up  his  mind. 

In  direct  exporting  also  the  question  of  payment  assumes  a  more 
complicated  form.  Owing  to  the  great  distance  from  New  York  and 
the  practice  of  paying  the  manufacturer's  90  days'  sight  draft  on  the 
buyer  with  another  90  days'  sight  draft  on  London,  the  whole  trans- 
action is  not  ordinarily  completed  in  less  than  240  days.  During 
the  war  a  good  deal  of  business  has  been  done  on  terms  involving 
payment  of  the  seller's  draft  by  a  sight  draft  on  New  York,  but 
even  that  requires  150  days  for  completion.  Yet  this  does  not  mean 
that  the  manufacturer  has  to  wait  all  that  time  for  his  money.  Far 
from  it.  He  can  take  his  draft  with  documents  attached  to  a  bank 
in  New  York  having  correspondents  in  Buenos  Aires  and  London  and 
get  his  cash  immediately.  The  bank  will  make  certain  charges  to 
cover  collection  and  interest,  which  normally  amount  to  about  2  per 
cent  of  the  sum  involved.  In  practice,  the  manufacturer  usually  pro- 
tects himself  by  adding  2|  per  cent  to  the  amount  of  his  invoice  and 
drawing  his  draft  for  the  total.  The  net  result  is  that  the  manufac- 
turer gets  his  money  immediately,  while  the  importer  gets  the  credit 
he  desires  and  pays  the  charges  made  by  the  bank  for  its  service  in 
holding  the  bills  until  due.  Of  course,  if  the  customer  fails  to  pay 
the  draft  at  maturity,  the  manufacturer  will  be  called  upon  to  reim- 
burse the  bank.  To  guard  against  such  occurrences,  however,  the 
manufacturer  has  available  the  full  credit  information  on  Argentine 
houses  obtainable  from  the  various  credit  agencies,  as  well  as  the 
private  advices  of  his  own  representative. 

One  other  factor  in  this  connection  should  be  noticed.  In  response 
to  the  desire  of  many  manufacturers  to  engage  in  foreign  trade 
without  the  heavy  expense  and  risk  of  individual  direct  effort,  the 
Webb  bill,  modifying  the  anti-trust  laws  so  as  to  permit  formation 
of  cooperative  export  associations,  has  been  passed  by  the  House  of 
Representatives,  and  is  now  (September,  1917)  awaiting  action  by 


REPORT  ON  ARGENTINA.  21 

the  Senate.  It  has  the  indorsement  of  the  administration.  Its  prin- 
ciple has  likewise  been  indorsed  by  four  National  Foreign  Trade  Con- 
ventions and  by  a  referendum  of  the  Chamber  of  Commerce  of  the 
United  States. 

IV.  ADDITIONAL  FACTORS  OF  MUTUAL  ADVANTAGE. 

There  are  two  factors  which  are  usually  beyond  the  control  of 
the  exporter,  but  which,  by  intelligent  effort  on  the  part  of  other 
American  business  men  or  of  the  Government,  can  be  made  extremely 
helpful  to  him,  while  at  the  same  time  helping  the  Argentinians  by 
supplying  additional  facilities  which  are  greatly  needed.  These  fac- 
tors have  to  do  with  shipping  and  with  investment. 

So  long  as  the  goods  shipped  from  this  country  to  Argentina 
did  not  compete  with  those  shipped  from  the  European  countries 
in  which  the  steamship  lines  were  owned,  there  were  few  complaints 
of  discrimination  in  rates,  though  the  service  from  Europe  has  always 
been  both  faster  and  more  frequent.  This  has  left  us  at  a  disad- 
vantage, because  of  the  slow  and  unreliable  postal  communication, 
but  mainly  through  the  fact  that  merchants  handling  American  goods 
had  to  have  a  larger  capital  tied  up  in  stocks  to  last  them  until  the 
arrival  of  the  next  steamer.  And  with  the  rigid  economic  measures 
now  being  adopted  by  the  great  European  nations,  it  is  hardly  likely 
that  their  shipping  companies  will  be  allowed  to  transport  our  goods 
on  even  terms,  if  we  show  any  signs  of  capturing  their  markets. 
Even  now  there  are  instances  where  the  Buenos  Aires  office  of  an 
American  firm  has  been  buying  its  goods  from  the  London  office  of 
the  same  firm  rather  than  from  the  home  office,  because  it  could 
obtain  vastly  superior  freight  service  from  London.  With  the  end 
of  the  war  and  the  revival  of  competition  from  Europe,  some  other 
way  will  have  to  be  found. 

Until  recently  the  establishment  of  American  steamship  lines  to 
Argentina  has  been  discouraged  by  the  scarcity  of  return  cargoes; 
but  in  the  last  three  years,  as  already  shown,  the  balance  has  run 
heavily  the  other  way,  and  there  has  been  a  considerable  increase 
in  the  number  of  American  ships  on  this  route.  A  peculiar  difficulty 
arises  from  the  lack  of  coal  in  South  America.  Hence,  all  steamers 
have  to  carry  enough  fuel  to  take  them  down  and  as  far  back  as  some 
coaling  station  in  the  West  Indies,  usually  Trinidad  or  Barbados. 
This  situation  normally  affects  steamers  of  all  nationalities  equally, 
but  during  the  present  war  it  has  become  a  serious  problem  for 
American  exporters.  The  difficulty  might  be  overcome  by  the  estab- 
lishment of  a  coaling  station  in  Porto  Rico  or  the  newly  acquired 
Virgin  Islands.  Argentina,  being  farther  from  the  consuming  cen- 
ters of  Western  Europe,  has  suffered  more  from  the  shipping  famine 


22  REPORT   ON   ARGENTINA. 

than  has  the  United  States,  and  is  eagerly  hoping  for  relief  through 
the  provision  of  American  ships. 

The  second  way  in  which  we  can  benefit  both  the  Argentinians 
and  ourselves  is  by  investing  capital  in  their  country.  In  this  regard 
England  holds  the  commanding  position,  having  financed  most  of  the 
railways  and  many  of  the  public  utilities  and  private  enterprises 
of  the  land.  But  the  demands  of  the  war  have  largely  interrupted 
the  supply  of  capital  and  checked  the  development  of  the  country, 
and  doubtless  will  continue  to  do  so  for  some  time  to  come. 

Now,  there  are  two  main  classes  of  consumers  in  Argentina:  the 
Argentinians  themselves,  and  the  foreign-owned  corporations  domi- 
ciled in  Argentina.  The  former  class  is  reached  for  the  most  part 
through  European  import  houses,  which  normally  buy  in  their  home 
markets,  but  American  houses  are  steadily  increasing  their  share  of 
the  trade.  With  the  cessation  of  imports  from  Germany  through  the 
port  of  Genoa  early  in  1915,  and  the  reduction  in  imports  from 
France  and  England  due  to  the  war,  many  European  houses  in 
Argentina  have  been  forced  for  the  first  time  to  seek  supplies  in 
this  country.  If  these  newly  introduced  American  articles  eventually 
reach  and  satisfy  the  native  Argentinian,  he  is  likely  to  create  a 
"  consumer  demand0'  for  them  after  the  war,  which  will  make  it  to 
the  advantage  of  the  European  importers  to  continue  to  handle  them, 
as  they  already  do  American  harvesting  machinery — otherwise,  they 
will  probably  revert  to  their  former  sources  of  supply. 

On  the  other  hand,  those  newly-introduced  American  articles  which 
eventually  reach  a  European-owned  corporation,  even  though  satis- 
factory, are  likely  to  be  discarded  as  soon  as  the  mother  country  is 
once  more  able  t0  supply  them — this  because  the  boards  of  directors 
of  such  companies  are  largely  composed  of  Europeans,  who  naturally 
give  the  preference  to  their  nationals  when  ordering  supplies.  The 
following  is  a  case  in  point:  A  United  States  company  had  built  a 
power  plant  near  Cordoba  which  contained  exclusively  United  States 
machinery;  a  few  years  later  the  same  company  built  another  plant; 
but  in  the  meantime  the  control  had  passed  to  Englishmen,  and  the 
machinery  in  it  was  exclusively  British.  One  of  the  unexpected 
effects  of  the  war  has  been  to  make  us  more  and  more  able  to  spare 
capital  for  investment  in  foreign  lands,  and  the  wise  use  of  as  much 
as  finds  its  way  to  Argentina  should  allow  that  country  to  resume 
its  interrupted  development  without  waiting  for  the  reconstruction 
of  Europe. 

V.    SUMMARY. 

The  conclusions  of  this  report  may  be  summarized  as  follows : 
I.  In  the  last  few  years  Argentina  has  been  assuming  a  place  of 
greater  importance  as  a  source  of  supply  for  many  staple  products 


REPORT   ON    ARGENTINA.  23 

which  are  needed  in  this  country.  In  return  it  offers  an  attractive 
market  for  a  large  variety  of  our  manufactured  goods,  if  the  problem 
is  approached  in  the  right  way. 

II.  It  frequently  happens  that  it  is  inadvisable  for  a  manufacturer 
to  undertake  direct  exporting.     In  such  cases,  after  it  has  been  ascer- 
tained that  the  particular  product  is  adapted  to  the  Argentine  market, 
the  existing  means  of  handling  such  business  may  be  used  to  ad- 
vantage. 

III.  No  manufacturer  should  undertake  to  do  his  exporting  to 
Argentina  direct  without  being  ready  to  apply  to  the  problem  the 
same  careful  attention  and  good  business  judgment  that  have  made 
him  successful  at  home.     Without  such  a  personal  interest  in  his 
Argentine  trade,  the  possibilities  of  the  market  can  not  be  fully 
realized. 

IV.  The  commercial  and  financial  relations  between  the  United 
States  and  Argentina  can  be  further  strengthened  to  their  mutual 
advantage  by  the  use  of  United  States  ships,  and  especially  of  United 
States  capital,  to  help  develop  the  resources  of  the  "  Great  Republic 
of  the  South." 

SOURCES  OF  INFORMATION. 

In  addition  to  the  first-hand  information  acquired  while  in  Ar- 
gentina, the  following  sources  have  been  used  for  much  of  the  infor- 
mation obtained  in  the  report: 

Dollar,  Capt.  Robert:  How  to  Obtain  Foreign  Trade.  New  York,  Official 
Report  National  Foreign  Trade  Convention,  1914. 

Duval,  G.  L. :  Th«  Relation  of  the  Merchant  to  Import  and  Export  Trade. 
New  York,  Official  Report  National  Foreign  Trade  Convention,  1914. 

Farrell,  J.  A.:  The  War  and  South  American  Trade.  New  York,  National 
Foreign  Trade  Council,  Bulletin  No.  1,  1914.  (Out  of  print.) 

Hough,  B.  O. :  Practical  Exporting.     New  York,  American  Exporter,  1915. 

Filsinger,  E.  B. :  Exporting  to  Latin  America.  New  York,  D.  Appleton  &  Co., 
1916. 

Business  Training  Corporation :  Course  in  Foreign  Trade.  New  York,  Busi- 
ness Training  Corporation,  1916. 

The  commission  respectfully  submits  to  you  and  to  the  Latin 
American  Beturn  Visit  Committee  the  material  which  it  has  gathered, 
and  indulges  in  the  hope  that  study  of  the  facts  set  forth  here  and 
elsewhere  will  stimulate  the  business  community  of  the  United  States 
to  address  itself  with  increased  vigor  to  the  promotion  of  trade  rela- 
tions between  Argentina  and  the  United  States. 
Respectfully, 

OWEN  GATHRIGHT,  Chairman. 

JULY  1,  1917. 


24  REPORT  ON  ARGENTINA. 

APPENDIX. 

NOTES  ON  LEATHER,  HIDES,  AND  RELATED  INDUSTRIES  IN 

ARGENTINA. 

[Prepared  by  Owen  Gathright,  chairman  of  the  return  visit  party  for  Argentina.] 

So  many,  varied,  and  increasing  have  been  the  demands  and  the  drains  upon 
the  basic  supplies  of  materials  entering  into  the  production  of  leather  that 
prices  have  soared  high,  and  much  ingenuity  and  capital  have  been  expended 
in  efforts  to  reduce  cost  and  time  of  production.  It  can  not  be  said  that  these 
efforts  have  uniformly  resulted  in  the  production  of  a  better  or  even  as  good  an 
article  of  leather  as  of  old. 

It  is  a  fact,  notably  in  the  United  States,  that  the  supply  of  cattle,  and, 
therefore,  the  supply  of  hides,  has  not  kept  pace  with  the  steady  increase  in 
population  with  its  consequent  larger  demand  for  leather  for  all  the  varied 
domestic  and  industrial  uses  and  purposes  to  which  it  has  long  been  applied. 

It  may  safely  be  said,  I  believe,  that  no  raw  basic  material  used  in  such 
quantities  as  hides  of  cattle,  and  so  necessary  to  supply  the  needs  of  the 
human  family,  has,  under  normal  conditions  of  trade,  advanced  so  steadily  and 
greatly  in  a  given  time.  The  green  hide  of  a  Chicago  or  Argentine  packer  steer 
with  its  offal  of  flesh,  hair,  salt,  and  tail,  now  brings  five  or  six  times  as  much  per 
pound  in  the  States  as  in  the  eighties,  and  sells  for  twice  the  price  per  pound 
that  finished  first-class  thoroughly  bark-tanned  harness  leather  sold  for  in  the 
eighties.  The  end  is  not  yet  reached  in  prices,  unless  intelligent  and  scien- 
tific means  be  taken  to  conserve  and  use  economically  not  only  hides  and  skins, 
but  the  valuable  tanning  and  currying  materials  that  enter  into  the  manufac- 
ture of  good  leather.  I  would  place  emphasis  upon  "  good  "  leather,  for  it  is 
little  short  of  criminal  to  kill  the  life  and  service  of  a  good  hide  in  the  tanning, 
either  by  quick  processes  in  order  to  shorten  the  time,  or  by  the  introduction 
of  salts  or  other  mineral  substances  to  add  weight  to  the  leather. 

Long  and  exhaustive  tests  by  the  War  Department  of  the  United  States  Gov- 
ernment, through  the  Quartermaster's  and  Ordnance  Departments,  have  demon- 
strated the  superiority  of  bark-tanned  leather  for  service  as  required  in  the 
military  equipment  of  our  Army,  in  shoes  (particularly  for  the  soles),  harness, 
saddles,  etc.,  preference  being  given  to  oak-bark  tannage,  particularly  because 
it  resists  water  or  dampness  better  than  other  tannages,  and,  therefore,  is 
naturally  longer  lived,  and  not  as  liable  to  disintegration  from  the  effects  of  the 
ment  of  American  banks  or  branches,  and  there  is  room  for  more  of  these. 

TANNING    MATEEIALS. 

Argentina  now  occupies  the  position  of  being  the  world's  largest  exporter  of 
hides  and  tanning  materials,  from  which  the  United  States  draws  her  greatest 
outside  supply. 

Next  to  the  hide  (or  skin),  the  most  important  raw  material  in  the  making 
of  leather — good  leather — is  one  that  produces  the  tannin.  The  two  chief 
materials  of  the  United  States  for  this  purpose  are,  or  have  been,  oak  bark  and 
hemlock  bark,  the  oak  having  been  longer  used,  and  generally  conceded  the 
best  for  producing  leather  of  superior  quality  and  durability.  That  the  supply 
of  these  barks,  particularly  the  oak,  has  been  rapidly  approaching  a  condition 
when  it  would  not,  at  any  price,  be  adequate  to  meet  the  requirements  of  the 
tanning  industry,  has  recently  and  repeatedly  been  claimed.  Like  conditions 
obtain  in  the  great  tanning  countries  of  Europe,  probably  more  acutely  than 
in  our  country,  and  they  have  cast  about  for  the  best  sources  of  supply  from 
other  countries.  What  do  we  find  as  the  result  of  this  search  for  new  and 


REPOET  ON  ARGENTINA. 


25 


reliable  tanning  materials?  The  British  capitalist  who  had  found  his  many 
hundred  millions  invested  in  Argentina  railroads,  docks,  lighting  plants,  and 
other  utilities,  to  pay  him  well,  and  the  less  wealthy,  more  scientific  German, 
backed  by  financial  interests  allied  to  the  tanning  industry,  began  some  years 
ago  an  aggressive  development  of  the  quebracho  wood  and  tanning  extract 
industry  in  Argentina,  which  in  a  comparatively  short  time  has  grown  to- 
remarkable  proportions  and,  as  figures  show,  with  profitable  results  to  the 
investors.  There  are  some  eight  or  ten  large  companies  engaged  in  the  business 
of  selling  quebracho  logs  to  be  sawed  and  ground  up  and  rendered  into  liquid, 
or  solid  tanning  extract,  very  much  as  syrup  or  sugar  is  made  from  cane,  or 
as  maple  syrup,  or  sugar,  in  the  States  is  made  by  boiling  the  sap,  or  wood 
extract  down  into  a  liquid  form,  or  into  solid  hard  cakes,  having  very  much 
the  appearance  of  rosin,  or  asphalt.  Not  all  these  companies  make  the 
quebracho  tanning  extracts;  the  logs  are  sold  largely  to  Germany,  England, 
and  other  foreign  countries,  and  to  an  extent  to  the  United  States,  to  be  made 
into  the  extract.  There  is  a  large  sale  of  the  smaller  quebracho  timber  for 
beams,  posts,  and  firewood,  but  the  few  companies  that  have  manufactured  the 
extract  have  built  up  a  remarkable  business.  Through  the  courtesy  of  the 
management  (Mr.  Gustavo  Brandeis,  administrator  general)  and  from  the 
report  of  the  directors  of  the  Forestal  Land,  Timber  &  Railway  Co.  (Ltd.), 
the  largest  of  these  companies,  some  interesting  figures  are  given  on  the 
showing  of  its  business  for  the  years  ending  December  31,  1914  and  1915. 
We  submit  also,  from  other  sources,  some  salient  figures  as  to  this  industry. 
The  Forestal  Co.,  said  to  own  some  5,000,000  acres  of  timbered  pasture  and 
agricultural  land  in  the  Province  of  Santa  F§,  is  also  a  large  breeder  of  cattle. 
Its  home  office  and  sales  headquarters  are  in  London,  but  before  the  war  the 
selling  agency  of  the  company  was  at  Hamburg.  On  the  outbreak  of  the  war 
the  two  German  directors  were  removed  from  the  board,  as  was  the  German 
manager  in  Buenos  Aires. 

The  Forestal  has  a  capital  of  £3,091,699,  or  about  $15,000,000,  half  in  prefer- 
ence and  half  in  ordinary  shares  of  £1  each,  to  use  the  British  term.  Preference 
shares  are  entitled  to  G  per  cent  cumulative  dividend  and  25  per  cent  of  the 
surplus  profits  available  for  dividends,  wh'le  ordinary  shares  are  entitled  to 
75  per  cent  of  the  surplus  profits  available  for  dividends.  Of  the  above  stock 
193,300  shares  each  preference  and  ordinary  were  sold  in  1914  at  £2  and  £3 
per  share,  respectively,  or  a  premium  of  100  per  cent  for  preference  and  200 
per  cent  for  ordinary  shares,  the  total  premium  received  amounting  to  £579,900, 
or  $2,750,000.  These  additional  shares,  or  their  proceeds,  were  used  for  the 
acquisition  of  the  assets  of  the  New  York  Tanning  Extract  Co.  and  the 
Argentine  Quebracho  Co.  The  properties  of  the  Argentine  company  are  now 
included  in  the  item  of  "  Freehold  timber  and  pastoral  lands,  factories,  steam- 
ers," etc..  of  the  Forestal  Co.,  which  item  on  December  31,  1914,  amounted  to 
£4,251,890,  or  over  $20,000,000.  The  assets  of  the  Forestal  Co.,  in  round  figures, 
are: 


Assets. 

Pounds 
sterling. 

United 

States 
equivalent. 

Freehold  timber  lands,  factories,  steamers,  etc  

4  251  SCO 

S21  000  f  00 

Stock  of  extract  and  felled  timber 

930  931 

4  oOo'oOO 

Ft  )c'  s  or  stores  and  materials  

248,  663 

1   180  010 

540  7C6 

2  5"0  COO 

1  ive  stock  

52>,8  3 

2  500  000 

Sundry  do!  ts  due  the  company,  bills  receivable  advances  etc 

818  282 

3  900  000 

Cash  at  banks  and  on  hand.  ,  

317,945 

1,500  000 

Total  assets,  approximate 

11  890  270 

57  2oO  000 

26  REPORT  ON   ARGENTINA. 

In  addition  to  the  preferred  and  ordinary  shares  outstanding,  there  are  two 
issues  of  5  per  cent  mortgage  bonds  of  £1,200,000  each. 

The  factory  and  real  estate  in  New  York  acquired  from  the  New  York  Tan- 
ning Extract  Co.  were  incorporated  into  a  new  American  company  entitled 
"  New  York  Quebracho  Extract  Co.,"  the  shares  and  bonds  of  which,  owned 
by  the  Forestal  Co.,  are  included  in  the  item  of  "Holdings  in  associated  under- 
takings and  other  investments  "  on  the  books  of  the  company. 

Many  most  interesting  details  are  set  forth  in  the  report  of  the  directors 
presented  to  the  ninth  annual  general  meeting  of  the  Forestal  Co.,  at  London 
June  18,  1915  (Baron  Emile  D'Erlanger,  chairman),  and  in  the  31-page  pro- 
ceedings of  that  meeting,  from  which  I  quote  briefly  with  the  object  of  setting 
before  our  people  facts  as  to  the  importance  of  the  quebracho  wood  and  extract 
business,  not  alone  to  the  great  tanning  industry  of  the  United  States  but  as 
a  field  for  the  profitable  investment  of  American  capital. 

The  report  states: 

"  The  outbreak  of  the  war  caused  serious  dislocation  of  the  company's  affairs 
for  a  few  months  when  all  but  two  of  the  extract  factories  had  to  be  closed 
down,  and  the  sales  of  timber  to  Europe  were  almost  completely  stopped. 
These  conditions,  of  course,  adversely  affected  the  results  for  1914.  However, 
since  the  beginning  of  the  current  year  (1915)  the  factories  have  been  working 
to  their  fullest  capacity.  The  results  so  far  obtained  (June,  1915)  justify 
the  anticipation  that  the  profits  for  1915  will  exceed  those  of  any  previous 
year.  It  is  most  gratifying  to  be  able  to  place  before  you  so  strong  a  balance 
sheet,  however,  and  I  am  glad  to  be  able  to  say  that  a  balance  sheet  to  June 
30,  1915,  instead  of  to  December  31,  1914,  would  reveal  a  stronger  position 
still.  [Applause.]  " 

The  results  for  1914,  that  had  been  "  seriously  affected  by  the  war,"  show : 
Fixed  assets,  £4,251,000  December,  1914,  against  £3,436,000  December,  1913,  an 
increase  of  £815,000,  or  nearly  $4,000,000 — this  in  the  face  of  the  fact  that,  in 
the  language  of  the  report : 

"  We  have  deleted  from  our  accounts  the  sum  of  £405,000  of  good  will,  in- 
cluded in  fixed  assets  last  year.  When  we  purchased  the  Argentine  Forestal 
Co.  and  turned  it  into  an  English  company  we  had  to  pay  £405,000  for  good 
will.  It  is  indisputable  that  the  good  will  is  worth  a  great  deal  more  than 
£405,000,  nevertheless,  we  thought  it  was  a  good  thing  to  avail  ourselves  of  the 
premium  realized  on  the  shares  under  the  American  contract  (£579,921)  and 
delete  (charge  to  profit  and  loss)  this  sum  from  our  balance  sheet." 

This  is  unquestionably  a  strong  position. 

"  Holdings  in  associated  companies  December,  1913,  £163,000 ;  December,  1914, 
£540,000.  The  addition  of  £377,000  is  due  to  new  holdings  in  the  New  York 
Quebracho  Extract  Co.,  and  to  the  bonds  we  hold  of  the  Province  of  Santa  Fe. 
Live  stock,  December,  1913,  £420,000 ;  December,  1914,  £529,000 ;  valuation  made 
on  the  same  principle.  Total  of  liquid  assets,  live  stock,  extract,  felled  timber, 
etc.,  of  £2,845,000  could  readily  be  sold.  Reserve,  in  round  figures,  is  £740,000, 
all  invested  in  the  business  of  the  company.  Depreciation  account,  composed 
of  sums  set  aside  out  of  profits  year  by  year,  amounts  to  £491,000." 

Nearly  $2,400,000  of  profits  "  gleaned  out  of  the  woods  "  and  set  aside  for 
depreciation  speak  eloquently  of  profits  that  must  have  gone  into  dividends  to 
satisfy  that  hungry  mortal,  the  stockholder. 

"  Profit  on  trading,  dividends  from  associated  undertakings,  and  interest 
£614,880"  (nearly  $3,000,000).  On  this  point  the  report  says: 

"  Not  as  good  as  we  should  have  liked  to  put  before  you,  but  it  would  be  most; 
ungrateful  to  grumble  at  a  profit  and  loss  account  which  shows  such  a  profit 


REPORT   ON   ARGENTINA.  27 

In  a  year  of  stress  and  duress  like  that  through  which  we  have  passed.  For 
oight  months  of  the  year  prices  ruled  lower  than  ever  before." 

Quebracho  extract  in  June,  1914,  was  $62  to  $63  a  ton  gold  in  Buenos  Aires, 
nrnl  in  June,  1916,  about  $235  to  $245  per  ton  gold,  though  the  logs  were  quoted 
at  $12.75  ton  gold  in  June,  1914,  and  only  $15  a  ton  in  June,  1916,  in  Argen- 
tina. It  was  stated  in  Argentina  that  at  June,  1916,  price  of  quebracho  logs, 
about  $15  a  ton  gold,  the  extract  could  be  made  for  $80  or  $90  a  ton.  It  is 
claimed  that  4  tons  of  logs  will  produce  a  ton  of  the  extract. 

From  the  "  not  good  profit "  in  $60  to  $80  a  ton  quebracho  extract  in  1914 
the  Forestal  paid  8  per  cent  on  preferred  shares,  6  per  cent  on  ordinary  shares, 
added  £117,500  ($550,000)  to  its  generous  depreciation  account  and  £26,500  to 
its  reserve  account. 

A  synopsis  of  the  results  of  the  Forestal  Co.'s  operations  for  the  year  1915, 
obtained  recently,  shows  a  trading  profit  of  £1,281,299  as  compared  with  £614,880 
for  1914,  or  over  100  per  cent  increase  in  profit,  and  the  chairman  of  the  share- 
holders' meeting,  London,  June  16,  1916,  gave  them  good  reason  to  hope  that 
the  extremely  satisfactory  results  for  1915  "  would  be  greatly  surpassed  dur- 
ing 1916." 

After  deducting  London  charges,  and  debenture  interest  from  the  large  trad- 
ing profit,  and  setting  aside  £143,600  for  depreciation  account,  now  totaling 
£634,170,  adding  £33,600  to  reserve,  making  it  total  25  per  cent  of  the  paid-up 
capital,  a  net  profit  of  £900,947  ($4,300,000)  was  left,  nearly  four  times  the 
net  profit  of  1914  after  similar  deductions.  Of  this,  £200,000  was  set  aside  for 
excess  profit  duty,  income  tax,  war,  and  other  contingencies,  £463,000  paid  in 
dividends,  12  per  cent  on  preferred,  and  18  per  cent  on  ordinary  shares ;  £200,000 
placed  to  special  reserve ;  £37,000  added  to  the  "  carry  forward  "  to  the  credit  of 
both  classes  of  shares. 

EXPORTATION   OF  QUEBRACHO  EXTRACT  AND  LOGS   FROM    ARGENTINA. 

The  exportation  of  quebracho  tanning  extract  from  Argentina  since  1900, 
six  years  before  the  Forestal  Co.  was  formed,  increased  from  a  little  less  than 
6,000  tons  that  year  to  113,600  tons  in  1915,  worth  approximately  $20.000,000, 
of  which  35,400  tons  came  to  the  United  States.  The  falling  off  of  extract 
exportation  into  the  United  States  in  1915  from  1914  may  have  been  due  to 
the  large  importation  of  logs  and  the  manufacture  of  the  extract  in  this 
country,  as  the  United  States  imported  from  Argentina  66,000  tons  of  quebracho 
logs  in  1914  and  96,000  tons  in  1915,  of  total  exportations  of  291,000  and 
195,000  tons  of  logs  for  the  respective  years.  The  exportation  of  quebracho 
logs  for  the  manufacture  of  the  extract  was  240,000  tons  in  1900,  fell  back 
to  200,000  in  1903,  rose  to  438,000  tons  in  1911  (the  record  year,  nearly  100.000 
tons  in  excess  of  any  previous  year),  fell  back  to  279,000  tons  in  1912,  and  rose 
to  342,000  tons  in  1913,  the  second  largest  year  on  record.  Of  this  large  1913 
exportation  of  logs  the  year  before  the  war  Germany  took  129,364  tons,  or 
pearly  38  per  rent  of  the  whole — more  than  the  next  two  countries  combined, 
namely,  Russia  (52,665  tons,  and  the  United  States,  which  took  54,682  tons. 
The  exportation  of  logs  for  1914  was  291,000  tons;  for  1915  it  was  195,000 
tons,  of  which  the  United  Stiuos  took  80,000  tons,  or  nearly  50  per  cent  of  all 
exported  in  tbnt  year. 

QUEBKACHO    EXTRACT,    QUEBRACHO    LOGS,    AND    SMAU.KU     \\OO1). 

It  1s  rstiiTaterl  that  four  tons  of  quebracho  logs  will  make  one  ton  of  the 
tanning  extract. 

Quebracho  wood  (Colorado  or  rtv.l.  from  wMr'i  tani  Ing  extract  !-•  imtU.^  Is 
•kory  hard  and  heavy,  its  specific  fjrnvity  IK-SHU'  1,27  as  *i gainst  1.1S  for  ebony. 


28  KEPOKT  ON  AKGENTINA. 

0.77  to  0.90  for  English  oak,  0.70  for  ash,  0.55  for  elm,  and  0.45  for  white  pine, 
and  naturally  yields  a  large  percentage  of  extract.  It  is  said  to  yield  in 
weight  fully  25  per  cent  of  solid  tanning  extract,  and  the  by-products  are  very 
valuable,  particularly  in  eastern  Argentina,  the  center  of  greatest  population, 
where  timber  of  all  kinds  is  very  scarce.  In  fact,  quebracho  beams  for  rail- 
road ties  and  other  purposes  bring  higher  prices  per  ton  than  the  logs  used 
for  manufacture  of  extract,  while  the  still  smaller  timber  is  carefully  graded 
into  three  or  four  sizes  and  lengths  for  posts,  for  which  there  is  and  will  con- 
tinue to  be  great  demand  for  wire  fences,  etc.  All  defective  quebracho,  offal, 
branches  of  trees,  etc.,  find  ready  sale  as  fuel,  as  our  West  Virginia  and  similar 
$3  to  $4  a  ton  coal  has  brought  $30  to  $40  a  ton  in  Argentina.  It  is  claimed  by 
experts  that  2$  tons  of  quebracho  as  fuel  equals  1  ton  of  coal.  Our  committee, 
on  its  trip  of  observation  and  investigation  through  interior  provinces,  saw 
practical  demonstrations  of  the  use  of  quebracho  wood  (offal)  as  an  effective 
and  economical  fuel  in  the  English-owned  power  plant  of  the  Santa  Fe  street- 
car system,  as  up  to  date,  clean,  and  complete  a  plant,  for  its  purpose,  as  is  to 
be  found  anywhere.  A  large  stock  of  coal  was  on  hand  for  any  emergencies, 
but  great  stacks  of  quebracho  carefully  piled  were  being  fed  the  furnaces. 
Mr.  Eugene  Betts  and  his  assistant,  Mr.  Lovelli,  who,  under  the  effective 
arrangements  made  by  Dr.  Albert  Hale  for  our  trip  to  the  interior,  extended 
us  all  the  courtesies  and  practical  assistance  possible,  took  us  over  their  rail- 
way system  and  power  plant,  and  through  the  legislative  building  to  call  on 
the  governor  of  the  Province  of  Santa  Fe ;  and,  through  the  courtesy  of  the  chief 
of  the  department  of  docks,  who  gave  us  the  use  of  his  launch,  accompanied 
us  on  a  sail  of  inspection  of  the  docks,  where  we  saw  a  ship  loading  a  cargo 
of  quebracho  extract  exclusively,  worth  $1,600,000,  destined  for  far-away  Russia. 
We  landed  and  looked  partly  through  an  uncompleted  plant  being  erected  for 
the  manufacture  of  dyes  from  wood,  in  nearly  all  colors,  it  was  claimed.  The 
interesting  machinery  for  "  clawing  "  the  logs  into  fine  shavings  being  similar 
to  that  used  in  the  manufacture  of  tanning  extract. 

Santa  F<5  is  the  chief  port  for  export  of  quebracho  logs  and  vies  with  Buenos 
Aires  in  export  of  the  extract.  The  latter  is  also  exported  from  Rosario  and 
Collastiua. 

QUEBUACHO  TANNED  LEATHEB. 

Our  observations  and  limited  investigation  of  the  tannage  of  leather  in 
Argentina  by  the  use  of  quebracho  lead  to  the  conclusion  that  tanners  there 
who  use  only  the  extract  from  that  wood  do  not  get  as  good  results  in  the 
finish,  and  probably  not  in  quality  of  leather,  as  those  tanners  in  the  United 
States  who  combine,  or  blend,  quebracho  extract  with  oak,  hemlock,  or  other 
tanning  ingredients. 

We  inspected  at  a  large  plant  at  Buenos  Aires  the  process  of  tanning  leather 
by  the  use  of  the  quebracho  wood  ground  into  a  substance  very  much  like  coarse 
sawdust  or  hominy,  this  ground  wood  being  spread  upon  the  hide  after  it  had 
been  soaked,  dehaired,  fleshed,  and  laid  in  the  tanning  vat.  Layers  of  hide  with 
ground  quebracho  alternating  between  until  the  vat  was  properly  filled,  when 
water  of  proper  temperature  or  liquor  would  be  let  in,  and,  as  by  the  "  old 
fashioned  bark-tanned  "  process  used  largely  in  the  United  States,  the  hides 
were  allowed  to  remain  for  four  or  five  to  six  months,  and  sometimes  longer, 
until  the  tanning  had  been  extracted  from  the  wood  and  thoroughly  penetrated 
and  tanned  the  hides.  This  tannery  utilized  thoroughly  every  particle  of 
the  quebracho  log,  which  was  sawed  into  proper  lengths,  split  to  thicknesses 
of  3  or  4  inches,  and  fed  into  a  powerful  grinder,  similar  to  our  hominy 
mill.  After  the  tannin  had  been  thoroughly  extracted  from  the  dust  it  was 


KEPOKT  ON   ARGENTINA.  29 

fed,  wet,  into  the  furnace,  which  with  the  powerful  draft  of  a  tall  concrete 
stack  seemed  to  make  of  it  as  good  fuel  as  dry  wood  or  coal.  This  tannery 
spent  not  a  dollar  annually  for  any  other  fuel. 

It  is  of  interest  to  note  that  only  the  body  or  wood  of  quebracho  timber  is 
used  and  ground  up  in  tanning,  the  bark  being  discarded;  while  the  reverse 
is  the  case  in  oak  and  hemlock  tannages,  for  which  only  the  bark  is  carefully 
stripped  from  the  tree  and  ground  to  the  proper  substance  for  "  bark  tanning," 
or  is  rendered  into  extract.  Owing  to  the  growing  scarcity  of  tan  bark  in  the 
United  States,  particularly  of  chestnut-oak,  the  wood  has  been,  to  a  limited 
extent,  used  in  making  a  tanning  extract,  said  to  be  of  inferior  quality  to  the 
extract  from  the  bark. 

TRIP  OF  OBSERVATION    AND  INVESTIGATION   INTO  INTERIOR  PROVINCES   OF   ARGENTINA. 

Rosario. — In  the  well-planned  but  necessarily  limited  trip  of  observation  and 
investigation  to  some  of  the  interior  Provinces  of  Argentina  laid  out  for 
us  by  Dr.  Hale,  we  visited  Rosario,  on  the  River  Parana,  a  city  of  230,000 
population,  second  hi  size  after  Buenos  A,ires.  We  were  met  by  Mr.  William 
Dawson,  jr.,  United  States  consul,  who,  after  luncheon  at  the  Strangers' 
Club,  conducted  us  through  an  inspection  of  the  extensive  port  works,  the 
Bolsa  de  Comercio,  and  other  places  of  commercial  interest  and  importance. 
Rosario  is  an  important  railroad  center.  The  workshops  of  the  Central  Argen- 
tine Railroad,  British  owned,  are  located  here,  in  which  are  manufactured 
not  only  equipment  for  its  own  use,  but  for  tramways.  Rosario  is  a  thriving, 
growing  business  center,  a  field  for  United  States  manufacturers  in  many  lines, 
but  not  extensively  cultivated  as  yet.  The  huge  hardware  and  kindred  goods 
establishment  of  Chiesa  Brothers,  with  a  battery  of  stores  and  warehouses 
that  rival  some  of  the  famous  plants  in  our  country,  is  located  here.  The 
owners  are  Italian.  The  most  courteous  general  manager  of  the  business, 
Mr.  E.  J.  Rosenberg,  gave  liberally  of  time  in  showing  us  through  the  sample 
and  sales  departments.  Practically  all  classes  of  heavy  and  shelf  and  builder's 
hardware,  tools,  cutlery,  iron,  wire,  iron  pipe,  chains,  cultivation  implements, 
machinery,  house  furnishing  goods,  furniture,  pumps,  sewing  machines,  etc., 
are  handled.  Here  and  there  were  to  be  seen  articles  of  United  States  manu- 
facture, but  not  conspicuous  in  number  or  variety.  This  house  is  the  agent  at 
Rosario  for  the  Buenos  Aires  branch  of  the  National  City  Bank  of  New  York. 

Cdrdoba. — Cordoba,  capital  of  the  Province  of  C6rdoba,  population  about 
110,000,  some  12  hours  from  Buenos  Aires  by  the  Central  Argentina  Railroad, 
commands  a  somewhat  unique  position  of  distinction  in  the  cities  of  Argentina. 
It  is  called  the  Greenwich  of  Argentina  for  here  is  located  their  famous  national 
observatory  which  sets  the  time  for  the  Republic.  We  were  greatly  pleased  to 
find  that  it  was  in  the  efficient  hands  of  a  citizen  of  the  United  States,  Dr. 
Carlos  Dillon  Perrine,  formerly  of  Lick  Observatory. 

A  distinction  associated  with  Cordoba  is  that  its  national  university  is  one 
of  the  two  or  three  oldest  in  the  Western  Hemisphere.  Founded  in  1615,  it  is 
some  years  older  than  Harvard,  and  is  the  most  noted  educational  institution  in 
Argentina. 

Opportunity  for  the  introduction  of  general  lines  of  United  States  manu- 
factures exists  at  Cordoba,  as  at  all  other  cities  visited,  to  a  greater  or  less 
degree,  if  manufacturers  will  give  proper  study  to  particular  requirements,  will 
furnish  what  is  desired,  not  always  necessarily  the  cheapest,  will  give  reason- 
able credit,  and  treat  the  trade  with  patient  courtesy  and  fairness. 

Quebracho  grows  near  Cordoba  and  logs  and  extract  are  marketed  to  some 
extent  from  this  point.  There  was  brought  to  our  attention  the  fact  that  great 


30  EEPORT   ON  ARGENTINA. 

deposits  of  white,  mottled,  and  colored  marble  of  superior  quality  lie  iii  the 
hills  near  Cordoba. 

8UMMAKY    AS    TO   LEATHER,    HARNESS.    SAMDLEUY,    SHOES,    ETC. 

Argentina  produces,  under  favorable  conditions,  great  quantities  of  raw 
materials  for  the  manufacture  of  leather,  namely,  hides,  skins,  and  quebracho, 
of  which  materials  the  United  States  imports  enormously.  Therefore  her  manu- 
facturers in  these  lines,  protected  by  a  high  tariff,  make  it  an  uphill  business  for 
United  States  manufacturers  to  export  these  goods  into  that  country  or  into 
Brazil,  particularly  the  cheaper  and  plainer  manufactures.  They  do  not  yet 
possess  the  skill  to  produce  as  finely  finished  leathers  as  in  the  United  States, 
particularly  for  better  classes  of  shoes,  riding  saddles,  etc.,  and  there  is  room  for 
export  trade  in  these  lines.  In  fact,  this  country  is  supplying  botii  Argentina 
and  Brazil  with  great  quantities  of  upper  leather,  and  a  number  of  standard 
makes  of  North  American  shoes  now  have  a  foothold. 

CONCLUDING    NOTES. 

1.  It  is  but  repetition  to  say  that  the  transportation  facilities  between  the 
United   States,   Argentina,   and   other   South   American  countries   are   wholly 
inadequate   and   far   from   favorable   to    the   interests   of   the   United    States 
importer  arid  exporter,  largely  because  the  ships  are  foreign  owned. 

2.  Our  financial  relations  have  been  given  a  healthy  impetus  by  the  establish- 
ment of  American  banks  or  branches,  and  there  is  room  for  more  of  these. 

3.  The  essentials  necessary  for  our  citizens   in  obtaining   South   American 
trade,  to  quote  an  experienced  banker,  are:  "(«)   Show  them  the  goods.     (&) 
Give  them  reasonable  credit,     (c)  Treat  them  fairly.    They  will  be  permanent 
customers." 


REPORT  OF  FINANCIAL  AND  COMMERCIAL  COMMISSION 
TO  URUGUAY  AND  PARAGUAY. 

Hon.  W.  G.  McAnoo, 

Secretary  of  the  Treasury, 

Washington,  I).  C. 

SIR:  The  commission  appointed  to  return  the  visit  of  the  delegates 
from  Uruguay  to  the  Pan  American  Financial  Congress  held  in 
Washington  from  May  24  to  29,  1915,  as  finally  organized,  was  com- 
posed of  Mr.  William  E.  Hinchliff,  Rockford,  111.;  Mr.  Thomas  A. 
Crimmins,  of  Boston,  Mass.;  Mr.  Henry  L.  Janes,  of  Montevideo, 
Uruguay;  Mr.  Emerson  Hinchliff,  of  Buenos  Aires,  Argentina;  and 
the  undersigned,  Mr.  Arthur  H.  Titus,  of  New  York,  who  was  elected 
chairman  of  the  committee. 

The  gentlemen  comprising  the  committee  had  duly  received  their 
commissions  to  act  as  members,  and  those  who  were  not  already  here 
arrived  in  time  to  permit  of  the  party  leaving  Buenos  Aires,  March 
19,  1916,  for  Montevideo.  We  advised  the  Uruguayan  committee  of 
the  date  of  our  intended  arrival,  and  when  we  reached  Montevideo 
early  in  the  morning  of  March  20  we  were  met  by  Dr.  Gabriel  Terra, 
chairman  of  the  Uruguayan  section  of  the  International  High  Com- 
mission; Mr.  H.  F.  Arthur  Schoenfeld,  charge  d'affaires  of  the 
United  States  legation ;  Col.  Gamarra,  military  aide-de-camp  to  the 
minister  of  finance ;  and  other  prominent  persons. 

The  committee  that  had  been  appointed  by  the  Uruguayan  Gov- 
ernment to  receive  and  entertain  our  committee  was  made  up  as 
follows:  Dr.  Gabriel  Terra,  chairman;  the  president  of  the  national 
chamber  of  commerce;  the  president  of  the  national  chamber  of 
industries;  the  president  of  the  mercantile  chamber  of  native  prod- 
ucts; the  president  of  the  association  for  the  protection  of  com- 
merce; the  president  of  the  Bank  of  the  Republic;  the  president  of 
the  State  insurance  bank;  the  president  of  the  Mortgage  Bank;  the 
manager  of  the  state  light  and  power  plant;  the  president  of  the 
board  of  administration  of  the  port;  the  president  of  the  Northern 
Railway  &  Tramway  Co. ;  the  manager  of  the  local  branch  of  the  Na- 
tional City  Bank  of  New  York;  the  manager  of  the  Midland  Rail- 
way; the  manager  of  the  Eastern  Uruguay  Railway;  the  manager  of 
the  Montevideo  packing  plant;  Mr.  Manuel  Sterling,  Mr.  Charles 
Shaw,  Mr.  P.  C.  Towers,  Mr.  Aurelio  N.  Surra  Santfn,  Mr.  Jorge 

31 


32  REPORT  ON  URUGUAY  AND  PARAGUAY. 

West,  Mr.  Ernesto  O.  Crocker,  Mr.  Ricardo  Shaw,  Mr.  Guillermo 
Young,  jr.,  Mr.  Juan  Domingo  Lanza,  Mr.  Eduarclo  Richard,  Mr. 
Alejandro  Shaw,  Mr.  Carlos  Bayne;  secretaries,  Mr.  Leopoldo 
Hughes  and  Mr.  Jose  Alberto  Nicolich;  military  attaches,  Col.  A. 
Gamarra  and  Lieut.  Col.  J.  Massioti. 

Upon  landing,  and  after  a  cordial  exchange  of  greetings,  our  com- 
mission was  escorted  through  the  city  and  along  the  new  boulevard  to 
the  Parque  Hotel,  in  Pocitos,  where  special  provision  had  been  made 
for  our  comfort.  Later,  during  the  forenoon,  we  were  taken  for  a 
ride  through  the  various  parks. 

At  4  p.  m.  the  members  of  our  commission  presented  their  creden- 
tials to,  and  were  formally  received  by,  Dr.  Pedro  Cosio,  the  min- 
ister of  finance,  whose  remarks  of  welcome  were  made  in  English,  as 
follows : 

Ladies  and  gentlemen,  at  one  of  the  last  sessions  celebrated  by  the  Pan 
American  Financial  Conference  at  Washington  last  May  the  delegates  of 
Uruguay  proposed  that  the  Government  of  the  United  States  should  appoint  a 
delegation  of  American  citizens  to  return  to  the  Latin  Republics  the  visit  that 
was  at  that  moment  being  paid  by  the  representatives  of  the  latter  to  the  great 
Republic  of  the  north. 

This  idea  was  accepted  by  acclamation,  and  the  invitation  was  thereby 
formally  accepted,  and  to  this  is  due  the  visit  with  which  we  are  now  honored. 

The  European  war,  which  has  affected  all  parts  of  the  world,  causing  serious 
economic  disturbances,  suggested  the  necessity  of  America  in  peace  drawing 
her  nations  together  under  the  impulse  of  the  community  of  interests  and  the 
harmony  of  friendly  sentiments. 

The  first  step  was  the  conference  of  1915  at  Washington,  and  this  is  being 
followed  by  these  visits  in  which  the  most  representative  people  in  commerce 
r.nd  industry  become  personally  acquainted  with  the  countries,  the  men,  and 
the  economic  life  of  Latin  America. 

After  this  visit,  will  come  another  great  exponent  of  this  movement  of  Pan 
American  concentration.  I  refer  to  the  conference  in  Buenos  Aires  next  April 
of  the  International  High  Commission. 

Ladies  and  gentlemen,  delegates  of  the  United  States,  the  Government  of 
Uruguay  receives  you  as  great  friends  and  has  made  you  acquainted  with  some 
of  the  most  conspicuous  representatives  of  our  commerce,  industry,  and  banking 
institutions,  who  will  undertake  to  show  you  everything  that  may  be  interesting 
to  you. 

In  the  name  of  the  Government  I  have  the  pleasure  of  offering  you  this  proof 
of  sincere  friendship.  And  now  allow  me  to  propose  the  happiness  of  the 
American  Nation  and  the  health  and  happiness  of  the  ladies  and  gentlemen  by 
whom  the  United  States  is  here  represented. 

The  welcome  of  the  minister  of  finance  was  responded  to  by  Mr. 
W.  E.  Hinchliff,  with  a  few  well-chosen  and  appreciative  remarks. 
The  party  then  visited  the  United  States  Legation,  and  in  the  absence 
of  the  United  States  minister  was  received  by  Mr.  Schoenfeld,  charge 
d'affaires. 

Tuesday,  March  21,  in  the  forenoon  the  party  was  taken  to  visit 
the  buildings  and  grounds  of  the  institute  de  agronomia  (institute 


REPORT  ON   URUGUAY   AND  PARAGUAY.  33 

of  agriculture),  a  short  distance  outside  the  city.  Dr.  Enrique 
Etcheverry,  agricultural  engineer  in  charge,  showed  the  party 
through  the  institution,  explaining  its  work  in  a  very  interesting 
manner.  The  college  has  a  four-year  course.  The  students  devote 
the  first  half  of  each  day  to  theoretical  work  and  the  afternoons  to 
practical  work,  the  last  year  of  the  course  being  spent  at  the  agri- 
cultural experiment  station. 

The  party  next  visited  the  orphan  asylum  and  hospital.  The 
director,  Dr.  Vidal  y  Cuervo,  and  the  directress,  Seiiorita  Angelica 
G.  de  Alsina,  conducted  the  party  through  the  institution.  They 
had  under  their  charge  420  children  of  from  4  to  14  years  of  age,  as 
well  as  a  few  older  ones.  There  were  80  infants  in  care  of  this  hos- 
pital, arid  the  institution  has  supervision  over  the  welfare  of  some 
1.500  small  children  that  it  has  placed  in  private  families. 

In  the  afternoon  a  visit  was  paid  to  the  lazareto  vetemnario  (veter- 
inary quarantine  and  detention  station).  This  institution  is  in 
charge  of  Dr.  Banza,  veterinary  surgeon.  An  interesting  and  in- 
structive sight  there  was  some  150  head  of  fine  cattle  that  were  being 
examined  preparatory  to  their  shipment  to  Brazil,  to  be  used  by  the 
Brazilian  Government  in  its  breeding  farm. 

Mr.  Alberto  Puig,  one  of  the  members  of  the  reception  committee, 
took  the  party  to  his  warehouses,  where  large  quantities  of  Uru- 
guayan wool  were  being  sorted,  baled,  weighed,  and  marked  for 
shipment  to  the  United  States. 

This  was  followed  by  a  visit  to  the  Montevideo  factory  of  Messrs. 
Salvo,  Campomar  &  Co.,  where  local  wool  was  being  made  up  into 
cloth,  blankets.  "  ponchos,"  and  knitting  yarn.  We  were  told  that 
this  textile  industry  has  received  a  great  impulse  from  orders  for 
woolen  blankets  and  "ponchos"  from  the  European  Governments 
during  the  past  two  years. 

In  the  evening  of  March  21,  at  8.30  p.  m.,  Mr.  Cosio,  the  minister 
of  finance,  gave  a  formal  banquet  to  the  visiting  party,  to  meet  50  or 
more  of  the  prominent  officials  and  citizens  of  Uruguay  and  their 
wives.  Senor  Cosio,  as  host,  in  his  remarks,  again  addressed  the 
party  in  English.  The  response,  in  behalf  of  the  visiting  committee 
was  made  by  Mr.  Arthur  H.  Titus. 

Wednesday,  March  22,  in  the  forenoon,  the  party  was  taken  to  the 
Cabana  Anaya  (horse  breeding  ranch)  of  Senor  Francisco  E.  Anaya. 
where  some  fine  race  horses,  many  of  them  of  North  American  stock, 
and  some  excellently  appointed  stables  were  seen.  Although  this 
establishment  was  some  distance  out  in  the  country,  good  macadam 
roads  were  encountered  all  the  way. 

During  the  afternoon  the  University  of  Montevideo  was  visited. 
This  is  a  very  creditable  institution,  of  which  the  citizens  of  Uruguay- 
are  rightly  proud. 


34  REPORT  ON    URUGUAY  AND  PARAGUAY. 

Of  special  interest  was  the  school  of  commerce  and  industry,  where 
the  director,  Dr.  Pablo  Fontaina,  exhibited  moving  pictures  of  many 
phases  of  the  cattle  industry — from  the  ranch  to  the  finished  product 
loaded  in  a  vessel  ready  to  be  shipped.  A  cordial  and  enthusiastic 
reception  was  given  the  party  by  the  faculty  and  students. 

In  the  evening  of  March  22,  Mr.  and  Mrs.  Crimmins,  who  were 
obliged  to  return  to  Buenos  Aires,  left  the  party,  taking  the  night 
boat  for  that  city.  Before  Mr.  Crimmins  left,  Mr.  Titus  was  elected 
permanent  chairman  of  the  committee,  and  empowered  to  act  for  it 
in  any  matters  that  might  come  up. 

Thursday,  March  23,  the  party  was  taken  in  a  special  train  on  the 
Ferrocarril  Central  del  Uruguay  (Central  Railway  of  Uruguay) 
to  Puerto  Sauce,  on  the  River  Plate.  The  train  left  Montevideo  at 
9.30  a.  m.,  arriving  in  Puerto  Sauce  at  2  p.  m.,  or,  according  to  Uru- 
guayan railway  time  tables,  in  which  the  24-hour  scheme  is  used,  at 
14  o'clock. 

The  accompanying  party,  numbering  about  25,  included  Dr.  Terra, 
the  chairman  of  the  entertainment  committee ;  Mr.  Bayne,  president 
of  the  railway;  Dr.  Santiago  Rivas,  minister  of  public  works;  and 
other  prominent  persons.  The  route  was  through  the  towns  of 
Piedras,  Canelones,  Santa  Lucia,  25  de  Agosto,  Rodriguez,  San  Jose, 
Mai  Abrigo,  Colonia  Suiza,  and  Rosario,  all  located  in  a  rich  and 
very  productive  section  devoted  to  agriculture. 

In  Puerto  Sauce  the  party  visited  the  main  woolen  textile  factory 
of  Salvo,  Campomar  &  Co.,  in  which  450  men  were  employed.  At 
the  time  they  were  working  on  some  uniform-cloth  contracts  for  the 
French  Government. 

Another  object  of  interest  at  Puerto  Sauce  was  a  paper  mill, 
through  which  the  party  was  conducted  by  the  proprietors. 

The  party  left  Puerto  Sauce  at  4  p.  m.,  stopping  at  Colonia  Suiza, 
where  carriages  were  in  waiting  to  take  the  guests  for  a  drive  through 
the  town. 

This  trip  consumed  the  entire  day.  Luncheon  and  dinner  were 
served  on  the  train  by  the  regular  dining-car  staff.  Montevideo 
was  reached  at  10.25  p.  m.,  and  the  train  was  run  out  on  the  dock 
alongside  the  river  boat  Ciudad  de  Montevideo,  on  which  the  com- 
mittee was  to  embark  for  Buenos  Aires. 

At  the  dock  to  bid  the  party  farewell  were  Senor  Cosio,  the 
minister  of  finance,  and  other  members  of  the  entertainment  com- 
mittee, and  prominent  persons  who  had  not  accompanied  the  party 
on  the  railway  trip. 

A  touching  parting  attention  was  the  presentation  to  each  of  the 
ladies  of  the  party  of  a  large  bouquet  of  flowers,  tied  with  ribbons  in 
the  colors  of  the  two  nations,  Uruguay  and  the  United  States  of 
America. 


REPORT  ON    URUGUAY   AND  PARAGUAY.  35 

Each  member  of  the  visiting  committee  was  deeply  impressed  by 
the  cordiality,  and  the  minute  desire  displayed  by  each  and  every 
member  of  the  entertainment  committee  and  by  all  other  persons 
whom  they  met,  to  make  them  feel  that  they  were  welcome  to  all 
the  country  had  to  offer. 

It  is  safe  to  say  that  each  member  of  the  visiting  committee  was 
convinced  of  the  value  of  the  exchange  of  courtesies  of  this  kind 
in  the  formation  of  closer  international  relations. 

Seilores  Jose  Alberto  Nicolich  and  Leopoldo  Hughes,  secretaries 
of  the  reception  committee,  and  Col.  Gamarra,  the  military  aide-de- 
camp of  the  minister  of  finance,  were  constantly  in  attendance  upon 
the  party. 

The  accommodation  and  service  provided  at  the  Parque  Hotel 
were  excellent,  and  the  entertainment  committee  had  placed  a  number 
of  automobiles  at  the  disposition  of  the  committee. 

While  the  visit  of  the  committee  was  of  comparatively  short  dura- 
tion, and  it  was  therefore  impossible  to  go  very  fully  into  the  economic, 
industrial,  and  commercial  features  of  Uruguay,  still  it  is  appro- 
priate to  append  some  statistics  indicative  of  the  commercial  pos- 
sibilities of  the  country. 

Uruguay  consists  of  about  72,000  square  miles  of  territory  and 
has  a  total  population  of  about  1,250,000,;  the  capital  city,  Monte- 
video, has  a  population  of  about  400,000,  or  in  other  words  one-third 
of  the  total  population  of  the  whole  country.  The  estimated  wealth 
of  Uruguay  is  about  $2,000,000,000,  approximately  distributed  as 
follows: 

Agricultural  and  grazing  lands $1,200,000,000 

Montevideo  real  estate 250,000,000 

Capital  invested  in  agriculture 60,000,000 

Capital  invested  in  live  stock 150,000,000 

Capital  invested  in   railways 70,000,000 

Capital  occupied  in  other  lines  of  commerce  and  industry 580,  000,  000 

Currency   in  circulation,  about 40,000,000 

The  public  debt  of  Uruguay  is  about  $150,000,000,  of  which  there 
are  approximately  $25,000,000  in  internal  loans  and  $125,000,000 
borrowed  from  other  countries.  Until  recently  there  was  very  little 
United  States  capital  in  Uruguay;  at  present,  however,  there  seems 
to  be  some  interest  displayed  in  this  country,  noticeably  in  the  de- 
velopment of  the  meat  industry,  and  in  the  installation  of  various  pub- 
lic-service and  sanitation  projects,  and  there  is  in  Montevideo  a 
branch  of  the  National  City  Bank  of  New  York.  All  of  these  things 
indicate  a  greater  interest  on  the  part  of  the  citizens  of  our  country. 
Of  course,  the  principal  industry  of  the  Republic  is  the  raising  of 
cattle  and  sheep.  The  live-stock  census  records  a  total  of  about 


36  REPORT  OK    URUGUAY   AND   PARAGUAY. 

8,000,000  cattle,  25,000,000  sheep,  500,000  horses,  and  180,000  hogs. 
A  normal  wool  crop  is  worth  in  Uruguay  about  $25,000,000.  The 
volume  of  cattle  slaughtered  annually  for  meat  products  is  approxi- 
mately $22,000,000.  The  agricultural  interests  are  small  in  compari- 
son to  industries  mentioned  above.  An  average  wheat  crop  is  about 
200,000  tons;  the  average  corn  crop  is  about  the  same,  and  oats  ap- 
proximately  30,000  tons. 

The  official  figures  indicate  the  exports  for  1915  were  $34,979,000, 
and  the  imports $73.290,000,  making  a  total  commerce,  both  in  and  out, 
for  the  year  $108,269,000. 

The  climate  of  Uruguay  is  equable,  and  the  country  has  wonder- 
fully quick  recuperative  powers.  In  some  years  the  lack  of  rain  will 
cause  an  almost  utter  failure  of  the  cereal  crops,  and  cattle  will 
languish  and  die,  this  condition  continuing  perhaps  for  several 
months,  when  suddenly  the  rain  will  fall  and  in  a  very  few  days  the 
results  will  appear  in  the  form  of  pasturage  sufficient  to  save  and 
fatten  the  remaining  cattle  and  prevent  the  complete  disaster  ex- 
pected. 

Before  the  outbreak  of  the  present  war  with  Europe,  Uruguay's 
purchases  from  the  United  States  amounted  to  about  $500,000  per 
month,  while  the  last  year  showed  this  amount  to  have  doubled. 
These  figures  seem  impressive,  but  it  must  be  understood  that  the 
increase  is  largely  due  to  the  fact  that  Uruguay  was  entirely  cut  off 
from  German  markets  which  heretofore  have  supplied  goods  to  the 
amount  of  several  million  dollars  per  year.  Uruguay,  for  instance, 
purchased  $2,000,000  worth  of  sugar  yearly  from  Germany,  also 
large  quantities  of  steel  and  iron.  These  are  now  being  bought  in 
the  United  States,  and  in  considering  these  figures  it  must  be  re- 
membered that  imports  at  the  present  time,  which  in  normal  years 
meant  a  vessel  tonnage  in  a  port  of  Montevideo  of  12,000,000  tons 
annually,  have  been  cut  in  half  since  the  beginning  of  the  war.  It 
does  not  hold,  however,  that  because  of  ^  ths  increase  in  purchases 
from  the  United  States  the  advantage  therein  obtained  by  us  will  be 
held  after  the  war,  for  those  who  have  examined  the  situation  will 
realize  that  United  States  citizens  have  not  been  as  alert  as  they  might 
have  been,  and  have  not  succeeded  in  gaining  a  market  which  might 
have  been  theirs  if  properly  sought. 

The  Uruguayan  people  are  very  favorably  disposed  to  the  United 
States  of  America,  and  often  show  their  preference  for  our 
ideas  in  the  management  of  their  schools,  public-service  systems, 
etc.,  and  if  we  had  displayed  a  reasonable  amount  of  energy  and  tact 
in  seeking  and  handling  the  commerce  of  their  country  we  would 
have  had  an  opportunity  during  the  past  two  years  that  might  have 
netted  us  great  results. 


REPORT  ON    URUGUAY   AND  PARAGUAY.  37 

A  great  portion  of  the  revenue  of  the  nation  is  obtained  through 
its  custom  duties,  which  before  the  war  averaged  about  $17,000,000 
yearly,  whereas  this  year  they  will  scarcely  amount  to  $12,000,000. 
With  all  this,  however,  the  economic  and  financial  situation  is  steady 
and  the  country  is  being  held  well  in  hand  for  the  expected  progress 
which  is  inevitable  upon  the  resumption  of  normal  conditions  in  the 
world  at  large. 

The  soil  of  Uruguay  is  capable  of  being  developed  into  a  very 
important  factor  in  the  commerce  of  the  country.  Land  suitable  for 
agricultural  purposes  is  abundant,  and  all  sorts  of  grains  grow 
quickly  and  luxuriantly.  However,  there  is  a  very  nominal  land 
tax  in  the  country  which  encourages  the  holding  of  undeveloped 
land  in  very  large  blocks,  and  inasmuch  as  nature  provides  so  quickly 
the  means  for  feeding  cattle  and  the  raising  of  cattle  requires  so 
much  less  help  and  labor  than  the  production  of  grain,  the  cuttle  in- 
dustry predominates  and  probably  will  for  some  years  to  come. 
This,  of  course,  somewhat  retards  the  growth  of  the  country  and 
explains  why  the  capital  city  of  Montevideo  contains  one-third  of 
the  total  population  of  the  nation. 

Business  in  Montevideo  is  clone  very  largely  on  a  cash  basis;  in 
other  words,  the  purchaser  pays  cash  for  almost  everything.  Bank 
checks  are  almost  unknown,  and  the  currency  of  the  country,  which 
ordinarily,  if  checks  were  used  as  a  paying  medium,  would  be  depos- 
ited in  the  banks,  now  rests  in  safes  and  strong  boxes  of  the  various 
merchants  and  individuals. 

The  people  of  Uruguay  are  exceptionally  conservative,  proud  of 
their  Government  and  of  their  position,  courteous  to  the  last  degree, 
and  most  progressive  in  their  desire  to  have  the  best  of  everything 
in  the  way  of  public  institutions,  utilities,  etc.  They  are  well  dis- 
posed to  the  United  States,  and  the  proper  cultivation  on  our  part 
of  that  disposition  would  undoubtedly  mean  the  establishment  of  a 
friendly  commercial  relationship,  which  would  be  of  great  value  to 
our  country  in  our  commercial  progress  which  must  from  now  on,  as 
never  before,  be  world-wide  in  its  scope  rather  than  confined  to  the 
borders  of  our  own  country  and  domain. 

Respectfully  submitted  for  the  commission. 

A.  H.  TITUS,  Chairman. 


REPORT  OF  FINANCIAL  AND  COMMERCIAL  COMMISSION 

TO  BRAZIL. 

Hon.  W.  G.  McAooo, 

Secretary  of  the  Treasury, 

Washington,  D.  C. 

SIR:  On  July  29,  1916,  the  members  from  the  United  States  of 
the  financial  and  commercial  commission  appointed  by  you  to  visit 
Brazil  in  response  to  an  invitation  extended  by  the  Latin  American 
delegates  to  the  Pan  American  Conference,  sailed  for  Brazil.  The 
personnel  of  the  committee  sailing  from  the  United  States  was  as 
follows:  Dr.  Richard  P.  Strong  of  the  American  International  Cor- 
poration, chairman;  Mr.  Charles  Lyon  Chandler,  South  American 
agent  of  the  Southern  Railway  Co.,  secretary;  Mr.  W.  L.  Findley, 
lawyer,  of  New  York  City ;  Dr.  Edward  F.  Stace,  president  of  Stacc, 
Burroughs  &  Co.,  of  Chicago,  111. ;  Mr.  Thomas  W.  Streeter,  of  the 
American  International  Corporation ;  Mr.  Henry  C.  Ulen,  president  of 
Ulen  Contracting  Co.,  engaged  in  important  enterprises  in  Uruguay; 
Mr.  Albert  C.  Weigel,  manager  foreign  department  of  Walsh  & 
Weidner  Boiler  Co.  of  Chattanooga,  Tenn.  The  members  of  the 
commission  resident  in  Rio  de  Janeiro  were  Mr.  W.  C.  Downs,  com- 
mercial attache  of  the  United  States  at  Rio  de  Janeiro;  Mr.  Louis 
R.  Gray,  head  of  Arbuckle  Bros.  &  Co.  in  Brazil,  and  Mr.  Frederic 
Lage,  formerly  of  Brazil  and  now  of  William  Morris  Imbrie  &  Co., 
of  New  York. 

The  members  sailing  from  New  York  made  a  stop  at  Bahia,  Brazil, 
on  August  13,  1916.  On  August  15  they  arrived  at  Rio  de  Janeiro 
and  were  welcomed  there  by  the  first  secretary  of  the  American 
Embassy ,  the  president  of  the  American  Commercial  Club  of  Rio, 
a  delegation  of  prominent  Brazilians,  and  the  remaining  members  of 
the  committee. 

The  commission  made  its  headquarters  at  Rio  de  Janeiro  until  Sep- 
tember 8,  1916.  During  their  stay  in  Rio  de  Janeiro  they  had  the 
privilege  of  meeting  men  prominent  in  the  political,  financial,  and 
business  life  of  Brazil,  and  they  were  the  recipients  of  many  courte- 
sies extended  by  the  American  ambassador,  Mr.  Morgan,  by  the  Bra- 
zilian minister  of  finance,  Senhor  Calogeras,  by  Senhor  Manuel 
Lisboa,  director  of  the  Government  railways,  by  local  members  of  the 
committee,  arid  others.  Through  the  courtesy  of  the  Brazilian  Gov- 
ernment and  Dr.  Calogeras,  the  commission  made  a  trip  on  a  special 
38 


REPORT   ON   BRAZIL.  39 

train  to  Bello  Horizonte,  the  capital  of  the  State  of  Minas  Geraes, 
stopping  on  the  way  at  important  manganese  mines  at  Burnier  and 
visiting  the  School  of  Mines  at  Ouro  Preto,  the  former  capital  of 
the  State  of  Minas  Geraes.  The  Brazilian  Government  also  furnished 
a  special  train  to  take  the  committee  from  Rio  de  Janeiro  to  Sao 
Paulo  at  the  conclusion  of  the  visit  to  Rio. 

In  their  efforts  to  carry  out  their  mission  the  committee  was  espe- 
cially indebted  to  his  excellency  Edwin  V.  Morgan,  the  United  States 
ambassador,  who  freely  gave  his  time  to  the  members  of  the  commit- 
tee and  brought  them  in  touch  with  representative  Brazilian  gentle- 
men. 

On  September  8,  the  members  of  the  committee  went  to  the  city  of 
Sao  Paulo,  from  which  important  center  they  made  trips  to  different 
parts  of  the  State  of  Sao  Paulo,  visiting,  among  other  places,  the 
famous  Dumont  coffee  plantation. 

In  complying  with  your  request  that  the  members  of  the  commit- 
tee, after  the  accomplishment  of  their  mission,  should  join  in  a 
report  to  the  honorable  the  Secretary  of  the  Treasury,  recommend- 
ing such  policies  on  the  part  of  the  Government  and  urging  such 
activities  by  business  men  of  the  United  States  as  will  promote  this 
purpose,  your  committee  would  state  that  in  rendering  this  report 
it  had  had  in  mind  the  fact  that  the  commercial  relations  between 
Brazil  and  the  United  States  have  not  been  recently  inaugurated, 
and  indeed  that  almost  every  phase  of  these  relations  has  been  going 
on  for  over  a  century. 

It  may  be  recalled  that  the  United  States  has  been  buying  from 
and  selling  to  Brazil  since  as  early  as  1802.  Therefore,  in  the  nec- 
essarily brief  investigation  of  this  subject  by  the  members  of  this 
financial  and  commercial  commission  it  would,  a  priori,  hardly  be 
expected  of  them,  or  within  their  province,  to  indicate  any  startling 
departure  in  relation  to  current  trade.  In  view  of  these  facts  the 
committee  has  considered  it  inadvisable  to  make  extensive  recom- 
mendations regarding  new  departures,  and  will  confine  itself  to  a 
few  suggestions  as  to  how,  in  the  opinion  of  its  members,  several 
obstacles  to  our  trade  with  Brazil  may  perhaps  be  overcome.  How- 
ever, the  mere  mention  of  some  of  the  most  important  of  these  ob- 
stacles will  perhaps  suffice  for  the  purpose  of  this  report,  since  there 
are  already  many  agencies  at  work  which  are  conscientiously 
endeavoring  to  remedy  these  defects  when  brought  to  their  attention. 

The  trade  relations  of  the  United  States  with  Brazil  present  some 
distinct  features  as  compared  with  those  between  the  United  States 
and  other  South  American  countries,  to  which  it  seems  advisable 
briefly  to  refer.  For  one  thing,  to  no  other  country  in  South  America 
do  we  sell  so  little  in  proportion  to  what  we  buy. 


40  REPORT  ON   BRAZIL. 

This  has  been  the  case  for  many  years,  although  it  is  true  that  the 
proportion  has  recently  somewhat  changed,  for,  while  the  nature 
and  amount  of  our  imports  from  Brazil  has  become  more  extensive 
than  formerly,  our  sales  to  Brazil  have  nevertheless  increased  at  a 
greater  rate.  Obviously  there  has  been,  since  the  outbreak  of  the 
war,  an  increased  demand  from  Brazil  for  our  goods,  but  the  move- 
ment of  our  manufacturers  to  take  advantage  of  the  check  of  Euro- 
pean exports  to  South  America,  in  order  to  introduce  our  produc- 
tions more  widely  and  more  consistently,  apparently  has  not  been  as 
yet  as  active  or  as  extensive  as  is  necessary  for  obtaining  permanent 
favorable  results  of  importance.  Our  manufacturers,  on  the  whole, 
are  apparently  learning  very  slowly  the  important  lesson  that  if  we 
wish  to  increase  our  trade  with  Brazil  we  must  endeavor  to  conform 
more  to  the  customs  and  wishes  of  the  people  and  to  the  standards 
and  usages  current  in  that  country,  though  we  are  glad  to  be  able 
to  report  that  in  several  instances  brought  to  our  attention  some 
improvement  in  this  respect  has  been  made.  In  this  connection  we 
believe  that  every  effort  should  be  made  to  bring  the  commercial 
organizations  of  this  country  to  a  realization  of  the  fact  that  our 
present  system  of  weights  and  measures  is  as  injurious  to  our  trade 
with  Brazil  as  it  is  with  other  foreign  countries. 

WEIGHTS   AND  MEASURES. 

One  hears  in  Brazil,  since  the  outbreak  of  the  war,  even  more 
criticism  and  dissatisfaction  at  our  adherence  to  the  English  system 
of  weights  and  measures,  since  man}7  merchants  in  Brazil  who  for- 
merly have  bought  in  European  markets  have,  for  the  time  being  at 
least,  been  compelled  to  import  only  American  goods.  Therefore  it 
is  recommended  that  all  possible  steps  be  taken  to  enact  the  necessary 
legislation  speedily  to  bring  about  the  adoption  of  the  metric  system 
by  the  United  States. 

The  commercial  banking  and  shipping  phases  of  our  trade  rela- 
tions with  Brazil  are,  when  the  matter  is  analyzed,  so  intricately 
interwoven  that  it  would  render  this  report  less  pertinently  appli- 
cable if  they  were  to  be  too  sharply  separated.  Therefore  they  will 
be  treated  as  much  in  conjunction  as  possible  with  the  aim  of  pro- 
posing remedies  that  will  benefit  the  whole  situation  rather  than 
only  one  part  thereof. 

TEA  NSPORTATION . 

The  transportation  facilities  between  the  United  States  and  Brazil 
have  been  thought  in  the  past  to  be  sufficient  for  the  present  volume 
of  business  between  the  two  countries,  and  in  fact  they  are  better  in 
proportion  than  those  between  the  United  States  and  any  other  South 
American  country.  Brazil's  import  and  export  trade  is  not  con- 


REPORT  ON    BRAZIL.  41 

fined,  as  in.  Argentina  and  Uruguay,  almost  entirely  to  one  central 
port,  which  also  serves  as  a  distributing  center  for  much  of  the  coun- 
try. On  the  contrary,  her  various  ports  of  Para,  Pernambttco,  Bahia. 
Rfo  de  Janeiro,  Santos,  and  Rio  Grande  do  Sul,  each  serve  a  distinct 
area,  each  with  almost  distinct  exports  and  imports,  and  with  each, 
as  well  as  with  many  smaller  ports,  there  is  direct  and  regular  com- 
munication with  the  United  States.  With  almost  all  of  these  such 
communications  exist  under  the  (lags  of  the  two  countries.  This 
can  not  be  said  of  the  shipping  between  any  other  South  American 
country  and  the  United  States.  The  Lloyd  Brazlleiro  Line  on  the  one 
hand  and  the  United  States  and  Brazil  Steamship  Co.,  in  addition 
to  other  lines  under  the  flags  of  other  nations,  furnish  regular  pas- 
senger and  freight  transportation  facilities. 

It  is  nevertheless  exceedingly  desirable  that  a  more  direct  and  more 
speedy  passenger  service  should  be  secured  between  Brazil  and  the 
United  States. 

BANKING. 

As  regards  the  means  of  improving  banking  f aci  iities  and  financial 
relations,  arid  also  the  financing  of  public  and  private  enterprises, 
and  the  stabilization  of  international  exchange  between  the  United 
States  and  Brazil,  these  matters  have  already  been  so  extensively  re- 
ported on  by  the  representatives  of  the  Federal  Trade  Commission 
and  the  Department  of  Commerce  that  your  committee  feels  it  hardly 
necessary  to  enter  into  a  detailed  discussion  of  them.  The  National 
City  Bank,  of  New  York,  opened  branches  in  Rio  de  Janeiro,  Sao 
Paulo,  and  Santos,  possibly  the  three  most  important  cities  of  Brazil, 
for  the  initiation  of  United  States  branch  banks.  Both  the  capital 
city,  as  well  as  Sao  Paulo,  the  leading  industrial  and  business  cen- 
ter, had  long  since  needed  these  essential  factors  in  inter- American 
commerce.  A  few  days  before  your  committee  arrived  at  Bahia  a 
branch  of  the  National  City  Bank  had  been  opened  there,,  subordinate 
to  the  branch  in  Rfo  de  Janeiro. 

It  would  seem  advisable  that  branches  of  American  banks  be  also 
opened  in  Para,  Pernambuco,  and  Porto  Alegre,  and  it  would  appear 
that  such  action  would  not  merely  be  of  direct  financial  benefit  to 
the  institution  inaugurating  it,  but  would  also  serve  as  a  direct  meas- 
ure of  promoting  the  commerce  and  influence  of  the  United  States  to 
these  cities,  and  to  the  States  of  Brazil  dependent  on  them  for  their 
growth  and  development.  In  the  course  of  time,  following  the 
example  of  the  banks  of  European  countries,  many  American  bank- 
ing institutions  will  doubtless  enter  the  Brazilian  field,  and  the 
competition  resulting  thereby  will  serve  to  increase  the  financial  re- 
lations between  the  two  largest  American  Republics. 


42  REPORT  ON   BRAZIL. 

COMMERCIAL  DISPUTES. 

As  regards  the  extent  to  which  commercial  disputes  now  arising 
may  be  settled  by  a  system  of  arbitration  between  commercial  bodies, 
your  committee  would  recommend  the  more  general  adoption  of  some 
such  agreement  as  now  exists  between  the  Chamber  of  Commerce  of 
the  United  States  of  America  and  the  Bolsa  de  Comercio  of  Buenos 
Aires.  Such  an  agreement  might  be  worked  out  between  the  Asso- 
ciacao  Commercial  do  Rio  de  Janeiro,  as  well  as  the  chambers  of 
commerce  of  all  the  more  important  trading  centers  of  Brazil  on  the 
one  hand  and  the  Chamber  of  Commerce  of  the  United  States  of 
America  on  the  other. 

In  the  Republic  of  Brazil  the  statutory  regulation  of  negotiable 
instruments  is  vested  in  the  National  Government,  and  has  been  exer- 
cised in  the  Codigo  Commercial  do  Brazil,  enacted  by  the  Federal 
Congress.  A  part  of  this  code  went  into  effect  in  the  year  1909  and 
in  its  entirety  it  became  operative  January  1,  1917. 

In  the  United  States  of  America,  in  so  far  as  bills  of  exchange  and 
promissory  notes  are  concerned,  this  power  is  exercised  by  the  sepa- 
rate States.  Efforts  have  been  made  to  secure  uniform  legislation  on 
this  subject,  and  a  bill  has  been  prepared  for  that  purpose  and  sub- 
mitted to  the  various  State  legislatures.  This  "uniform  act"  has 
been  adopted  by  a  few  of  the  States.  Other  States  have  enacted  it 
after  making  such  changes  as  were  deemed  necessary  to  meet  peculiar 
local  conditions,  while  in  many  States  it  has  been  ignored.  After 
20  years  of  effort  44  States  of  48  have  adopted  this  model  law  in  some 
form  or  other. 

There  is  thus  no  uniformity  of  legislation  on  the  subject  of  bills  of 
exchange  and  promissory  notes  in  this  country,  and  no  standard  of 
comparison  by  which  the  differences  between  the  legal  regulation  of 
this  subject  by  Brazil  and  the  United  States  can  be  gauged. 

It  may  be  said,  however,  that  in  general  principles  the  laws  of  the 
two  countries  governing  this  subject  are  the  same. 

The  provisions  of  the  Commercial  Code  of  Brazil  relating  to  bills 
of  exchange  and  promissory  notes  are  embraced  in  57  brief  sections. 
They  lay  down  in  clear,  concise,  and  comprehensive  terms  the  gen- 
eral rules  that  are  to  govern  the  making,  issuing,  negotiating,  pay- 
ment, and  enforcement  of  these  negotiable  instruments.  No  attempt 
is  made  to  cover  the  limitless  field  of  varying  circumstances  which 
daily  arise  in  the  ordinary  transactions  of  business.  In  contrast  with 
this  the  negotiable  instruments  law,  submitted  to  and  already  adopted 
by  forty-four  of  our  States,  is  a  voluminous  document. 

Its  aim  seems  to  be  to  lay  down  rules  to  cover  every  conceivable 
circumstance,  or  combination  of  circumstances,  that  may  arise,  and  to 


REPORT  ON   BRAZIL.  43 

point  out  just  what  may  or  may  not  be  done  in  every  unusual  or  ex- 
traordinary case.  A  great  variety  of  things  are  permitted  or  forbid- 
den which  are  not  mentioned  in  the  Brazilian  negotiable  instruments 
law.  But  these  differences  are  in  matters  of  detail,  the  underlying 
principles  governing  the  subject  being  substantially  the  same  in  both 
enactments.  In  the  matter  of  bills  of  lading  the  Commercial  Code  of 
Brazil  follows  a  course  similar  to  that  adopted  in  dealing  with  bills 
of  exchange  and  promissory  notes.  In  a  few  brief  sections  general 
rules  are  prescribed,  with  little  attempt  to  anticipate  or  provide  for 
unusual  or  exceptional  cases. 

BILLS  OF  LADING. 

The  Congress  of  the  United  States,  during  the  session  of  1916, 
passed  a  bills  of  lading  act,  applicable  to  interstate  and  foreign  busi- 
ness, which  was  to  take  effect  on  January  1,  1917.  This  law,  while 
much  more  voluminous  than  the  Brazilian  statute  on  the  same  sub- 
ject, does  not  greatly  differ  from  the  latter,  except  in  being  more 
exact  and  specific  in  matters  of  detail.  In  this  connection  the  com- 
mittee acknowledges  the  valuable  assistance  rendered  to  it  by  Dr. 
Francisco  de  Castro,  jr.,  of  Rio  de  Janeiro,  a  member  of  the 
Brazilian  bar. 

Since  the  question  of  improving  the  parcel-post  and  money-order 
systems  and  the  reduction  of  postal  rates  is  now  being  studied  by  the 
Hon.  Robert  F.  Maddox.  chief  of  the  Division  of  Foreign  Mails  of 
the  Post  Office  Department  of  the  United  States,  who  is  now  travel- 
ing in  South  America  for  this  purpose,  your  committee  would  merely 
recommend  that  the  same  reasons  which  have  led  our  Post  Office 
Department  to  conclude  a  2-cent  postal  arrangement  with  British 
Guiana  might  be  applied  with  even  greater  force  to  the  negotiations 
of  a  postal  treaty  or  agreement  with  Brazil  by  which  a  similar  agree- 
ment could  be  put  in  force  with  that  country. 

NEWS    SERVICE. 

As  regards  the  improvement  of  cable  service  and  the  reduction  of 
cable  rates,  the  secretary  of  your  committee  was  informed  by  Mr. 
Roy  W.  Howard,  the  representative  of  the  United  Press,  a  United 
States  corporation,  that  the  cable  rates  from  Great  Britain  to  Brazil 
were  half  those  from  the  United  States  to  Brazil,  which,  apart  from 
other  considerations,  rendered  it  almost  impossible  to  publish  any 
large  amount  of  news  matter  from  the  United  States  in  the  Brazilian 
press,  such  as  is  received  daity  in  Buenos  Aires  by  La  Prensa  and 
La  Nation  of  that  city.  A  direct  cable  between  the  United  States 
and  Brazil  is  to  be  greatly  desired. 


44  REPORT  ON   BRAZIL. 

COFFEE. 

With  reference  to  creating  in  the  United  States  dependable  and 
reliable  markets  for  the  commodities  of  Brazil,  coffee  being  the 
principal  commodity  of  Brazil  naturally  occupies  the  most  prominent 
position  in  the  thoughts  not  only  of  the  producer  of  the  article  but 
also  of  the  Government  of  the  country.  Much  has  been  written 
about  it,  and  it  is  unnecessary  to  make  any  mention  in  this  report  of 
how  coffee  is  grown  and  marketed,  that  being  generally  very  well 
understood. 

It  appears  that  much  more  care  is  now  being  given  than  heretofore 
to  the  planting  and  care  of  the  tree,  to  the  preparation  of  coffee  after 
gathering,  and  to  the  separation  of  the  different  qualities,  which,  to- 
gether with  the  fact  of  the  United  States  Government  prohibiting 
imports  of  the  article  below  a  certain  grade,  has  made  the  average 
cup  of  coffee  now  drunk  here  to  be  better  and  more  palatable.  It  has 
been  suggested  that  there  is  still  ground  for  improvement  in  the 
United  States  in  the  way  in  which  coffee  is  roasted  and  prepared 
for  the  table.  It  is  held  by  some  in  Brazil  that  the  higher  or  deeper 
brown  coffee  is  roasted  the  less  caffeine  there  is  in  it;  this  statement 
has  not  been  confirmed,  but  the  indications  are  that  there  is  but  a 
slight  diminution.  It  is  also  stated  that  in  preparing  it  for  the  table 
the  best  way  is  to  pulverize  the  bean  and  percolate  boiling  water 
through  it,  not  pouring  the  water  more  than  twice  if  the  best  flavor 
from  the  coffee  is  to  be  obtained. 

Brazil  produces  more  coffee  than  all  the  other  countries  of  the 
world  together,  and  in  view  of  its  lower  cost  of  production  in  com- 
parison with  the  rest  of  the  world  there  could  be  a  larger  produc- 
tion in  Brazil  if  consumption  increased  more  rapidly  than  it  does. 
The  consumption  in  the  United  States  per  capita  has  decreased  on 
account  of  the  advertising  attacks  made  against  coffee  as  a  bev- 
erage by  producers  of  substitutes  for  the  article.  The  Brazilian 
Government  has  viewed  with  much  concern  and  displeasure  this 
propaganda  directly  attacking  the  interests  of  their  chief  product, 
and  the  officials  of  the  State  of  Sao  Paulo  naturally  desire  that  some 
steps  should  be  taken  to  prevent  any  unwarranted  and  untruthful 
attacks  made  in  the  periodicals  and  other  sources  of  advertisement  in 
the  United  States  against  coffee,  the  chief  commodity  of  Brazil. 

SCHOLARSHIPS  FOR  BRAZILIAN  YOUTHS. 

Your  committee  would  also  recommend  that  either  some  existing 
organization  undertake,  or  that  some  society  be  established  in  Brazil 
with  correspondents  in  the  United  States  for  the  sending  of  young 
men  from  Brazil  to  the  United  States  to  work  in  factories  and  in- 


REPORT   ON    BRAZIL.  45 

dustrial  establishments  on  the  plan  adopted  in  Chile,  by  which  the 
correspondents  in  the  United  States  acquaint  the  Sociedad  Pro 
Estudiantes  Chile-no*  en  el  Estrangero  with  the  opportunities  for 
young  men  for  such  work.  This  Chilean  society,  assisted  by  the 
Chilean  Government  and  private  funds,  pays  for  the  transportation 
of  these  candidates  to  the  United  States  and  also  provides  financial 
support  for  them  during  the  period  of  their  training  in  the  fac- 
tories. 

In  conclusion,  we  wish  to  reiterate  the  idea  that  the  members  of 
this  committee  are  fully  conscious  of  the  fact  that  their  studies  of 
many  of  these  problems  were  necessarily  of  a  brief  and  cursory 
nature,  but  we  nevertheless  venture  the  hope  that  our  labors  may 
prove  not  to  have  been  in  vain,  particularly  with  respect  to  the 
further  extension  of  friendly  relations  and  the  promotion  of  mutual 
helpfulness.  Furthermore  it  is  hoped  that  the  activities  of  this  com- 
mittee may  be  found  to  have  contributed  at  least  another  link  in  the 
chain  of  intellectual  sympathy  and  understanding  between  the 
people  of  Brazil  and  of  the  United  States. 
Very  respectfully, 

RICHARD  P.  STRONG,  Chairman. 


REPORT  OF  FINANCIAL  AND  COMMERCIAL  COMMISSION 
TO  PERU,  BOLIVIA,  AND  CHILE. 

Hon.  W.  G.  McAooo, 

Secretary  of  the  Treasury, 

Washington,  D.  C. 

SIR  :  The  commission  selected  to  serve,  in  accordance  with  the  reso- 
lution adopted  at  the  Pan  American  Financial  Conference,  held  at 
Washington  in  the  month  of  May,  1915,  as  a  return  visit  committee 
to  Peru,  Bolivia,  and  Chile,  consisted  of  the  following  members: 
Mr.  O.  M.  Clark,  president  of  the  Clark  &  Wilson  Lumber  Co.,  of 
Portland,  Oregon,  representing  the  lumber  interests  of  the  United 
States;  Mr.  A.  W.  McLellan,  president  of  the  Alden  Mills  Cor- 
poration, of  New  Orleans;  Mr.  Ernest  H.  Wands,  of  New  York. 
Mr.  Harry  Guggenheim  and  Mr.  W.  C.  Potter,  who  had  been  in- 
cluded among  the  commissioners,  found  it  impossible  to  await  the 
sailing  of  the  committee  from  New  York  and  departed  for  Chile  some 
days  before  the  date  set  for  th'e  sailing  of  the  party  for  Peru.  Messrs. 
Clark,  McLellan,  and  Wands  met  in  New  York  in  time  to  sail  on  the 
United  Fruit  Co.'s  steamer  Metapan,  on  April  15,  1916.  Mr.  Wands 
was  selected  to  act  as  the  chairman  of  the  committee. 

With  the  exception  of  a  stop  of  one  day  at  Habana  the  voyage  from 
New  York  to  Colon  was  uneventful.  A  day  was  spent  in  an  inspec- 
tion of  the  Panama  Canal.  The  committee  then  sailed  by  the  steam- 
ship Guatemala  of  the  Pacific  Steam  Navigation  Co.  for  Peru. 

ARRIVAL   IN    PERl!. 

The  first  Peruvian  port  at  which  the  commission  touched  was  Paita. 
The  harbor  is  merely  an  open  roadstead,  protected  to  some  extent, 
it  is  true,  from  the  prevailing  winds  and  currents,  and,  inasmuch  as 
the  west  coast  of  South  America  is  never  visited  by  the  destructive 
storms  which  at  certain  seasons  sweep  the  western  Pacific,  even  this 
unimproved  harbor  offers  a  relatively  secure  anchorage  to  the  numer- 
ous coastwise  and  overseas  vessels  calling  at  Paita. 

Paita. — The  commission  was  met  by  United  States  Commercial  At- 
tache William  F.  Montavon  and  made  welcome  to  Peru  in  the  name 
of  the  United  States  Legation  at  Lima. 

Paita  is  the  seaboard  terminus  of  the  Paita-Piura  Railway,  one 
of  the  many  short  lines  operated  by  the  Peruvian  Corporation. 
Piura,  the  inland  terminus  of  this  railway,  lies  in  the  midst  of  some 
46 


REPORT  ON   PERU,  BOLIVIA,  AND  CHILE.  47 

of  the  best  cotton  lands  in  Peru.  Here  the  rough  staple  cotton, 
known  in  the  trade  as  "  Peruvian  rough,"  is  grown  almost  exclu- 
sively. This  cotton,  having  a  coarse  texture  and  grayish  color,  mixes 
well  with  wool  and  is  used  in  the  manufacture  of  cheap  woolen  and 
shoddy  goods  largely  in  England.  Trails  lead  from  Piura  far  into 
the  interior,  through  the  grazing  lands  of  Cajamarca  into  the  beau- 
tiful upland  plains  where  lies  the  town  of  Cajamarca,  the  seat  of  the 
Inca  power  in  the  days  of  the  conquest;  and  passing  the  divide, 
extend  far  into  the  wooded  lowlands  of  the  montana  and  the  great 
department  of  Loreto,  even  to  the  upper  tributaries  of  the  vast  river 
system  of  the  Amazon. 

Only  a  few  miles  to  the  north  of  Paita  and  bordering  on  the  coast 
lie  the  rich  petroleum  fields  of  Negritos,  Zorritos,  and  Lobitos. 
Here  the  Imperial  Oil  Co.  has  recently  acquired  large  holdings  and 
has  undertaken  the  development  of  the  small  port  of  Talara  within 
its  own  properties.  Until  recent  years  the  borings  in  these  fields  had 
been  of  a  relatively  shallow  character,  and  the  development  of  the 
properties  was  far  from  attaining  its  fullest  proportions.  Experi- 
mental borings  have  now  shown  that  there  are  several  petroleum- 
bearing  strata  lying  at  depths  varying  from  500  to  3,000  feet,  and 
the  production  is  being  greatly  increased. 

Eten. — After  an  all-night  sail  from  Paita  the  Guatemala  arrived 
off  Eten  in  the  early  morning  of  May  2.  Like  Paita,  Eten  derives 
its  importance  from  the  fact  that  it  is  the  seaboard  terminus  and 
coastwise  shipping  point  for  the  Eten-Chiclayo  Railway,  which  taps 
the  rich  sugar  lands  which  lie  behind  the  first  foothills  and  are  irri- 
gated from  streams  flowing  from  the  snow-covered  peaks  of  the 
Andes.  In  this  valley  are  located  three  sugar  plantations,  which 
are  reached  by  the  train  from  Chiclayo  in  the  following  order: 
Pomalca,  an  estate  having  approximately  4,000  acres  in  cane  and 
producing  8,000  tons  of  sugar  per  annum ;  Tuman,  having  5,600  acres 
in  cane  and  producing  annually  15,000  tons  of  sugar;  and  Patapo, 
an  estate  having  an  area  in  excess  of  50,000  acres,  of  which,  how- 
ever, only  2,100  are  in  cane,  with  an  annual  production  of  about 
4,000  tons. 

The  Eten  manager  of  the  railway,  Mr.  A.  J.  Leon,  graciously 
placed  a  special  train  at  the  disposition  of  the  committee  and  made 
it  possible  within  the  few  hours  at  our  disposal  for  us  to  visit  the 
Tuman  estate.  This  great  estate  belongs  to  the  Pardo  family,  of 
which  the  present  President  of  Peru  is  a  member,  and  reached  its 
high  degree  of  productivity  under  the  personal  direction  of  this 
distinguished  statesman.  The  crushing  and  granulating  plants  on 
Tumai)  are  modern  in  every  detail. 

It  is  confidently  expected  that  the  production  of  Tuman  will  be 
20,000  tons  of  granulated  sugar  per  annum. 


48  REPORT  ON   PERU,   BOLIVIA,   AND   CHILE. 

Tunian  is  a  fair  illustration  of  what  scientific  administration  can 
make  of  the  sugar  lands  of  Peru.  Cutting  is  continuous  throughout 
the  year,  with  only  brief  interruptions  for  repairs  to  the  machinery, 
and  the  production  has  been  brought  up  to  nearly  5  tons  per  acre, 
or  about  three  times  the  average  production  in  Louisiana.  It  has 
been  estimated  that  sugar  can  be  produced  on  the  Peruvian  estates 
at  an  average  cost  of  less  than  $2  per  hundredweight,  and  with  the 
high  prices  prevailing  for  sugar  at  the  time  of  our  visit  to  Tuman 
the  earnings  of  these  estates  are  almost  fabulous. 

The  port  of  Eten  is  equipped  with  a  steel  pier  extending  800 
meters  out  to  sea  and  operated  by  the  Eten-Chiclayo  Railway  Co. 
This  pier  has  five  traveling  cranes  for  handling  cargo,  one  of  which 
has  a  capacity  of  14  tons.  In  addition,  the  railway  company  has 
3  gasoline  tugs,  11  lighters  of  20  tons  capacity  each,  and  has  on  sev- 
eral occasions  succeeded  in  handling  2,000  tons  of  cargo  in  a  single 
day. 

Mr.  Leon  stated  that  from  20  to  25  passenger  and  5  or  C  cargo 
steamers  of  an  average  tonnage  of  more  than  2,000  called  at  Eten, 
in  addition  to  a  large  number  of  smaller  coasting  steamers  and  sail- 
ing craft. 

The  total  exports  from  Eten  during  1915  <%>»• isisted  of  715,000 
packages  of  cargo,  weighing  68,840  tons.  Of  this  amount,  40,000 
tons  were  sugar  and  the  remainder  was  made  up  in  varying  propor- 
tions of  alcohol,  rice,  cattle,  hides,  and  other  agricultural  products. 
The  imports  amounted  during  the  same  year  to  27,000  tons  and  con- 
sisted of  flour,  coal,  kerosene,  gasoline,  lumber,  and  miscellaneous 
manufactured  goods. 

During  1914  and  through  1915  to  the  present  time  there  is  notice- 
able a  steady  increase  in  the  volume  of  trade  between  the  port  of 
Eten  and  the  United  States,  and  Mr.  Leon  suggested  that  the  im- 
portance of  this  trade  had  become  such  as  to  justify  the  appoint- 
ment of  a  United  States  consular  agent  at  Eten.  That  the  appoint- 
ment of  such  an  agent  would  tend  greatly  to  facilitate  trade  is  well 
illustrated  by  the  case  of  the  hides  exported  from  the  port.  During 
1915,  25,000  hides  were  exported  from  Eten.  Our  quarantine  regu- 
lations require  that  these  hides  be  disinfected  before  they  may  enter 
the  United  States.  In  order  to  secure  a  consular  certificate  of  disin- 
fection the  hides  must  be  shipped  at  considerable  expense  to  Callao 
and  back  again  to  Eton.,  or  Teexported  from  Oallao. 

Pacasmayo. — The  next  port  visited  by  the  committee  was  Paeas- 
mayo.  This  port  is  the  seaboard  outlet  for  a  fertile  valley  which 
extends  well  into  the  foothills  and  in  which  rice  and  cattle  are  the 
chief  productions.  Even  before  the  conquest  of  Peru  this  valley 
was  the  scene  of  a  highly  developed  agriculture,  and  there  are  evi- 


IlEPOBT  ON   PERU,  BOLIVIA,  AND  CHILE.  49 

dences  extant  to-day  that  a  great  river  watered  the  valley  and  made 
it  possible  for  a  populous  city  to  grow  up. 

The  Jequetepeque  River,  which  to-day  is  but  a  dry  gravel  bed 
winding  through  the  barren  desert  sands,  a  few  centuries  ago  sup- 
plied water  for  a  great  system  of  irrigation  of  which  some  of  the 
canals  may  still  be  traced;  the  valley  to  which  Pacasmayo  is  the 
gateway  must  have  been  a  veritable  garden  spot  stretching  from  the 
seaboard  far  into  the  mountain  fastnesses  of  the  Andes  and  provid- 
ing the  chief  outlet  to  the  Inchaic  headquarters  of  Cajamarca.  The 
waters  of  the  river  have  disappeared,  absorbed  apparently  by  the 
sands  of  the  desert.  As  is  true  elsewhere  on  the  Pacific  coast  of 
Peru,  there  are  at  Pacasmayo  great  subterranean  streams  at  a  depth 
of  20  to  60  feet.  These  streams  are  again  being  brought  to  the 
surface  by  means  of  wells  and  pumping  systems. 

Salaverry. — Salaverry,  at  which  port  the  Guatemala  arrived  at 
daylight  May  3,  lies  at  the  entrance  to  Chicama  Valley,  the  sugar 
lands  par  excellence  of  Peru.  In  this  valley  at  distances  varying 
from  20  to  50  miles  lie  the  richest  and  most  highly  developed  plan- 
tations of  the  country.  Among  these  Casa  Grande,  of  the  firm  of 
Guildermeister  &  Co.,  Cartavio,  belonging  to  the  firm  of  W.  R.  Grace 
&  Co.,  La  Roma  and  Laredo,  belonging  to  Peruvian  families,  are 
the  best  known  and  the  most  productive. 

The  committee  found  the  warehouses  at  Salaverry  overflowing 
with  sugar,  and  the  production  was  such  that  the  steamers  calling 
at  the  port  seemed  able  to  make  but  little  headway  in  relieving  the 
congestion.  The  pier  at  Salaverry,  like  that  at  Eten,  is  fairly  well 
equipped.  In  addition  to  sugar,  Salaverry  exports  cattle  and  min- 
erals in  considerable  quantities. 

Because  of  the  fogs  and  cold  southwest  winds  which  sweep  along 
this  coast  during  June,  July,  and  August,  the  population  living  at 
Salaverry  is  made  up  wholly  of  men  engaged  directly  in  shipping. 
Ten  miles  inland  lies  the  interesting  city  of  Trujillo.  Here  the 
temperature  is  milder  and  here  are  located  the  governmental  head- 
quarters, the  commercial  and  industrial  houses,  and  the  banking  in- 
stitutions, clubs,  etc.,  of  the  Chicama  Valley. 

ARRIVAL  AT  LIMA. 

Callao. — At  noon  on  May  4  the  Guatemala  arrived  at  Callao.  A 
representative  from  the  foreign  office  together  with  the  prefect  of 
the  Department  of  Lima  came  aboard  to  welcome  the  committee  on 
behalf  of  the  Government  of  Peru.  The  United  States  minister, 
Hon.  Benton  L.  McMillin,  and  the  consul  general  of  the  United  States. 
Mr.  William  H.  Handley,  together  with  committees  from  the  Lima 
Chamber  of  Commerce  and  other  organizations  of  the  city  greeted 
tho  committee  aboard  the  steamer.  The  courtesies  of  the  port  of 
1068—18 4 


50  REPORT   ON    PERU,    BOLIVIA,   AND   CHILE. 

Callao  were  granted  the  commission,  who,  accompanied  by  the  wel- 
coming delegates,  proceeded  ashore  in  a  launch  placed  at  our  service 
by  the  Peruvian  Government. 

Lima. — The  daily  press  of  Lima  had,  several  days  prior  to  our 
arrival,  devoted  some  space  to  the  announcement  and  discussion  of 
the  purposes  which  our  commission  had  in  making  this  visit  to  Peru. 
As  a  result  we  had  scarcely  had  time  to  establish  ourselves  in  the 
Hotel  Maury  when  callers  interested  in  one  phase  or  another  of  our 
mission  began  to  be  announced.  Among  the  first  of  these  was  Mr. 
Pedro  D.  Gallagher,  president  of  the  Lima  Chamber  of  Commerce. 
Mr.  Gallagher  most  generously  assured  the  committee  of  the  desire 
of  the  chamber  of  commerce  to  render  every  assistance  and  requested 
that  on  the  following  day  we  meet  him  in  the  directors'  room  at  the 
offices  of  the  chamber  of  commerce  for  the  purpose  of  more  fully 
outlining  the  character  of  the  information  we  desired. 

May  5,  the  first  day  of  our  stay  in  Lima,  was  largely  taken  up 
with  official  calls  on  the  United  States  minister,  Hon.  Benton 
L.  McMillin,  and  on  the  ministers  of  foreign  relations,  finance,  and 
public  works  of  the  Peruvian  Government,  and  in  a  conference  with 
the  officers  of  the  chamber  of  commerce. 

The  minister  of  the  treasury,  Dr.  Garcia  y  Lastres,  in  the  course 
of  our  visit  discussed  problems  of  public  finance  which  at  present 
confront  his  Government,  and  outlined  the  export  taxes  recently 
placed  on  certain  raw  materials  shipped  from  Peru,  including 
copper  and  sugar.  He  made  clear  the  fact  that  the  tax  was  assessed 
against  profits  or  net  income  rather  than  against  products,  and 
pointed  out  the  fact  that  direct  taxes,  including  a  tax  on  income,  were 
not  popular  in  Peru,  but  that  the  export  taxes  amounted  to  what 
might  be  styled  an  indirect  tax  on  incomes  and  had  met  with  less  op- 
position than  might  have  been  expected.  The  income  derived  from 
this  new  tax  had  been  greater  than  had  been  anticipated  because 
of  the  unusually  high  prices  being  received  for  the  agricultural  and 
mineral  products  of  Peru  against  which  the  tax  is  levied. 

Among  the  most  interesting  events  of  our  visit  to  Lima  was  our 
audience  with  His  Excellency,  President  Pardo.  His  Excellency  re- 
ceived us  in  one  of  the  beautiful  audience  chambers  of  the  historic 
executive  palace  at  Lima,  which  has  witnessed  the  splendor  of  tho 
viceregal  courts  under  former  administrations,  and  which  to-day  is 
the  executive  headquarters  of  the  Republic  of  Peru. 

The  commission  remained  in  Lima  from  May  4  until  May  13. 
During  this  time  places  of  historical  interest,  public  buildings  and 
institutions,  manufactories,  mills,  and  mercantile  establishments  were 
inspected  and  an  opportunity  offered  for  interesting  interviews  and 
conferences  with  the  men  who  are  at  the  head  of  affairs  in  Lima. 
The  committee  was  greatly  assisted  in  its  work  by  Mr.  Cisneros  y 
Raygado,  of  the  foreign  office ;  by  Mr.  Fernandez,  of  the  Asociacion 


REPORT    ON    PKRU,    BOLIVIA,    AND   CHILE.  51 

de  Industrias  de  Lima;  by  Mr.  Pedro  I).  Gallagher,  president  of  the 
Lima  Chamber  of  Commerce,  and  by  a  great  many  others  connected 
with  the  Government  or  with  the  commercial  and  industrial  estab- 
lishments of  Lima  who  gave  their  services  unstintedly  to  the  com- 
mittee, and  without  whose  assistance  it  would  have  been  difficult,  if 
not  impossible,  to  collect  the  large  volume  of  the  reliable  data  which 
was  gotten  together  by  the  committee  in  so  brief  a  space. 

The  office  of  the  minister  of  the  United  States  to  Peru  and  of  the 
consul  general  of  the  United  States  at  Lima  rendered  valuable  service 
in  collecting  reports  and  preparing  statistical  and  other  information 
for  use  by  the  committee.  Commercial  Attache  Montavon  and  Mr. 
L.  B.  Clark,  of  the  office  of  the  United  States  commercial  attache, 
placed  their  services  unreservedly  at  the  disposition  of  the  committee 
in  Lima,  arid  their  assistance  was  of  much  value  both  in  the  collec- 
tion of  data  and  in  the  compilation  of  reports,  but  especially  in 
making  it  possible  for  the  members  of  the  committee  to  make  the 
very  best  of  the  few  days  spent  in  Lima. 

The  committee  had  announced  prior  to  its  arrival  at  Lima  that 
it  desired  a  program  free  enough  from  social  functions  to  make  pos- 
sible the  devotion  of  most  of  its  time  to  the  study  of  conditions  and 
the  collection  of  information.  There  was  therefore  no  elaborate 
program  of  social  entertainment.  The  commission  was  entertained  at 
luncheon  by  Mr.  W.  G.  Hollow  ay,  manager  of  the  firm  of  W.  R.  Grace 
&  Co.,  in  Peru,  and  at  dinner  by  the  minister  of  the  United  States  to 
Peru,  Hon.  Benton  L.  McMillin,  at  whose  table  they  met  members 
of  the  cabinet  of  President  Pardo,  the  presidents  of  the  Lima  Cham- 
ber of  Commerce,  of  the  Bolsa  de  Coinercio  de  Lima,  and  other  gentle- 
men prominent  in  affairs;  by  Dr.  Felipe  Pardo,  brother  of  the  Presi- 
dent of  the  Republic  of  Peru ;  and  by  Mr.  Pedro  D.  Gallagher  and 
Mr.  Jose  Payan,  presidents,  respectively,  of  the  Lima  Chamber  of 
Commerce  and  of  the  Bolsa  de  Comercio  de  Lima. 

The  banquet  offered  the  committee  by  the  presidents  and  directors 
of  the  Chamber  of  Commerce  and  the  Bolsa  de  Comercio  was  at- 
tended by  men  most  prominent  in  the  financial  and  commercial 
circles  of  the  country.  While  at  the  other  functions  speaking  had 
been  limited  to  brief  toasts,  at  this  banquet  an  occasion  presented 
itself  for  the  public  expression  of  the  aims  of  the  commission. 

Mr.  Pedro  D.  Gallagher,  president  of  the  Lima  Chamber  of  Com- 
merce, speaking  in  English,  welcomed  us  to  Peru  in  the  following 
gracious  language: 

In  the  mime  of  the  commercial  and  financial  Interests  of  Peru,  1  welcome  you 
with  much  pleasure  to  our  shores.  The  visit  which  you  are  making  to  us  can 
but  make  stronger  the  ties  of  those  commercial  relations  between  our  countries 
which  give  unmistakable  promise  of  advantages  and  material  gain  for  both 
and  the  stimulation  of  which  has  ever  been  our  chief  ambition.  It  is  par- 


52  REPORT  ON   PERU,  BOLIVIA,  AND  CHILE. 

• 

ticularly  during  a  period  of  trouble  like  the  present  that  the  bonds  between 
those  nations  who  have  the  good  fortune  of  enjoying  peace  should  strengthen 
themselves  more  than  ever  before  in  order  thus  to  compensate  themselves 
mutually  for  the  part  that  may  be  theirs  in  the  loss  and  the  suffering  of  the 
entire  world.  I  hope,  therefore,  gentlemen,  that  the  visit  which  you  are  making 
to  Peru  may  enjoy  a  success  even  greater  than  that  which  you  had  hopes  for  and 
of  which  it  is  most  worthy  because  of  the  splendid  purpose  for  which  it-  was 
undertaken.  We  shall  spare  no  effort  to  cooperate  with  you  in  securing  this 
success. 

Mr.  Wands  responded  for  himself  and  his  associates  in  Spanish. 

To  me  there  Is  a  special  gratification  at  being  in  Peru  and  seeing  again  my 
friends  of  Lima,  many  of  whom,  I  am  glad  to  say,  are  friends  of  many  years' 
standing.  In  the  years  that  have  elapsed  since  my  first  visit  here  about  15 
years  ago,  the  people  of  our  two  countries  have  grown  to  know  one  another 
better.  There  has  been  a  most  satisfactory  development,  not  only  of  the 
commercial,  but  also,  I  am  glad  to  say,  of  the  social  relations  between  Peru 
and  the  United  States.  This  has  been  brought  about  by  the  efforts  of  both 
countries.  More  Peruvians  are  visiting  the  United  States  every  year  and  more 
people  from  my  country  are  coming  to  Peru  every  year.  Then  you  have  been 
extremely  fortunate  in  the  class  of  men  selected  by  your  Government  to  repre- 
sent you  in  diplomatic  and  consular  posts,  and  still  further  in  the  men  who 
Lave  represented  Peru  at  gatherings  like  the  Pan  American  Financial  Con- 
ference held  in  Washington  a  year  ago  and  the  Pan  American  Scientific  Con- 
gress held  in  Washington  only  a  few  months  ago. 

It  is  possible  that  the  idea  of  holding  such  a  conference  would  not  have  been 
conceived  had  it  not  been  for  the  war  in  Europe.  With  the  outbreak  of  that 
conflict  many  countries  that  formerly  sold  their  bonds  to  European  bankers 
were  forced  to  look  elsewhere  for  financial  markets.  Because  of  the  needs  of 
our  own  country,  investors  of  the  United  States  had  not  been  generous  buyers 
of  foreign  securities.  But  conditions  are  changing  with  amazing  rapidity. 
To-day  in  the  United  States  there  is  an  eager  interest  in  South  and  Central 
American  opportunities.  Business  propositions  from  South  America  are  care- 
fully studied  and  many  of  them  are  even  now  being  financed.  There  is,  in 
fact,  no  doubt  that  many  of  our  financiers  whose  vision  is  not  limited  have 
concluded  that  in  the  long  run  more  benefit  will  accrue  to  the  United  States  in 
financing  and  developing  South  America  than  in  holding  funds  to  lend  to  our 
European  trade  competitors  for  reconstruction  purposes  after  the  war. 

Our  business  men  realize  there  are  many  reasons  why  this  is  a  particularly 
good  time  to  get  acquainted  with  the  possibilities  of  Latin  America.  We  must 
bear  in  mind  that  there  are  only  three  large  international  trading  nations  in 
the  world — the  United  States,  Great  Britain,  and  Germany. 

Great  Britain  gained  her  commerce  by  establishing  the  first  line  of  steamers 
between  Europe  and  South  America;  by  introducing  the  first  cable;  by  financ- 
ing the  pioneer  railroads  which  opened  up  the  countries  to  settlement  fnd 
development ;  and  by  establishing  adequate  banking  facilities. 

Germany's  huge  trade  is  the  result  of  similar  enterprise,  but  she  was  also 
materially  helped  by  the  hundreds  of  thousands  of  German  emigrants  who 
settled  largely  not  only  in  the  southern  part  of  Brazil,  but  also  in  the  other 
South  American  countries. 

Great:  Britain  and  Germany,  the  countries  which  in  the  past  have  had  the 
greatest  merchant  marine  and  the  best  system  of  branch  banks,  have  been  the 
two  most  important  factors  in  the  world's  trade.  For  the  United  States  to 


REPORT  ON   PERU,  BOLIVIA,  AND  CHILE.  53 

develop  a  merchant  marine  there  must  be  a  return  cargo  commercially  acces- 
sible. Also,  in  order  to  establish  branch  banks  in  Soul!)  American  cities  with 
any  prospect  of  profitable  business  it  is  necessary  that  there  should  be  a  large 
export  trade  from  the  United  States  and  a  large  import  trade  on  the  part  of 
the  United  States  from  Latin  America.  In  other  words,  we  must  buy  your 
products  and  not  strive  solely  to  sell  you  our  manufactured  articles. 

The  problem  of  return  cargo  from  the  west  coast  of  South  America  is  being 
solved  by  the  rapid  development  of  your  copper  mines  and  other  industries,  the 
output  of  which  is  in  such  keen  demand  by  our  manufacturers. 

The  problem  of  return  cargo  from  the  eastern  coast  of  South  America  has 
been  solved  by  our  new  tariff  law,  which  permits  the  importation  of  South 
American  beef. 

The  opportunity  to  establish  branch  banks  under  our  new  Federal  law  comes 
at  a  happy  time.  The  business  to  be  secured  to-day  is  much  greater  than  it  was 
10  years  ago,  and  there  is  the  additional  advantage  of  millions  of  dollars  of 
money  from  my  country  which  has  been  invested  in  the  countries  of  the 
southern  continent. 

It  is  the  belief  of  the  commission  that  the  visit  to  Peru  has  done 
much  to  confirm  and  strengthen  the  ties  of  friendship  which  have  so 
long  bound  our  country  to  Peru,  and  that  as  a  result  of  the  personal 
conferences  held  with  men  who  are  leaders  in  the  industrial  and 
commercial  fields  in  Peru  much  has  been  accomplished  in  dispelling 
what  little  prejudice  there  may  have  been  against  our  goods  or  our 
trade. 

It  shall  not  be  our  purpose  to  set  forth  fully  the  vast  volume  of 
information  which  we  weie  able  to  collect  while  in  Peru.  Some  of 
this,  as  must  be  expected,  would  necessarily  have  to  be  submitted  to 
rigid  tests  before  it  could  be  accepted  at  its  face  value.  It  shall  be  the 
purpose  of  the  following  paragraphs  rather  to  suggest  lines  along 
which  further  investigation  may  be  made,  to  mention  such  sources  of 
information  as  were  made  available  and  to  summarize  very  briefly 
what  we  consider  to  be  the  information  of  greatest  value  at  the  pres- 
ent time  which  has  come  before  us. 

CONDITION  OF  PUBLIC  FINANCES. 

Moratorium. — Our  committee  was  especially  pleased  to  find  a  high 
degree  of  optimism  both  in  governmental  and  commercial  circles 
with  regard  to  the  country's  finances.  So  intimate  were  the  economic 
relations  existing  between  Peru  and  Great  Britain  and  the  countries 
on  the  Continent  of  Europe,  so  completely  were  the  finances  of 
Peru  dominated  by  those  of  the  Old  World  that  when  the  European 
war  broke  out  in  August,  1914,  there  seemed  no  means  of  escaping  a 
most  serious  panic  in  Peru,  involving  in  its  disastrous  effects  both 
Government  and  private  enterprises  and  institutions.  So  serious  was  / 
the  situation  that  on  September  22,  1914,  a  general  moratorium  was*r 
declared  to  remain  effective  for  a  period  of  one  year.  Business  re- 
mained at  a  standstill  and  the  financial  institutions  were  thus  given 


54  KKPORT   OK    PEBU,   BOLIVIA,   AND   CHILE. 

time  to  adjust  their  operations  to  the  new  conditions  brought  about 
by  the  war. 

Scarcity  of  circulating  medium. — As  was  to  be  foreseen  there 
was  a  universal  tendency  during  this  period  of  disturbance,  little 
short  of  panic,  to  hoard  metallic  money  and  there  soon  arose  the 
new  factor  of  a  shortage  in  the  circulating  medium  of  exchange. 
To  remedy  this  difficulty  the  Government,  in  cooperation  with  the 
banks  of  Lima,  issued  paper  in  the  form  of  circulating  checks  pay- 
able to  bearer.  Prior  to  the  war  the  circulating  money  of  Peru  had 
been  silver  and  gold  coin  with  the  pound  Peruvian  as  the  unit.  The 
silver  coin  known  as  a  sol  was  the  legal  equivalent  of  one-tenth  of  a 
pound  and  the  subsidiary  coins  were  decimal  parts  of  the  sol.  The 
pound  Peruvian  was  in  weight  and  fineness  the  exact  equivalent  of 
the  pound  sterling. 

Circulating  checks  issued. — The  act  of  the  Peruvian  Congress 
authorizing  the  issue  of  the  circulating  checks  limited  the  total 
amount  to  be  issued  to  2,200,000  pounds  and  the  amounts  of  the  issues 
were  to  be  distributed  among  the  banks  in  proportion  to  their  capital 
stock.  The  issues  were  in  each  case  to  be  protected  by  a  reserve  fund 
in  gold  equal  to  20  per  cent  of  the  issue  and  in  securities,  to  be  passed 
on  by  a  board  of  overseers,  equal  to  the  remaining  80  per  cent  of  the 
value  of  the  issue. 

Confidence  restored. — The  exports  of  Peru  soon  found  in  New 
York  a  market  as  good  as  or  better  than  they  had  theretofore  found 
in  Liverpool  and  the  other  markets  of  Europe.  The  prices  for  these 
exports  rose  rapidly  and  the  favorable  trade  returns  made  it  possible 
for  the  banks  of  their  own  initiative  to  increase  the  gold  reserves 
back  of  their  issues  of  circulating  checks.  As  the  public  became  ac- 
customed to  a  paper  currency  thus  supported,  confidence  was  restored 
and  the  metallic  currency,  which  had  been  so  carefully  hoarded,  has 
already  begun  to  reappear. 

Foreign  trade. — Two  factors  operated  to  curtail  the  foreign  trade 
of  the  country  and  consequently  to  reduce  the  custom  receipts  which 
had  been  the  chief  source  of  the  public  revenues — the  withdrawal 
from  their  usual  routes  of  many  of  the  merchant  ships  of  the  bel- 
ligerent nations,  the  consequent  rise  in  ocean  freight  rates,  and  the 
closing  to  a  great  extent  of  the  markets  of  Europe  which  practically 
cut  Peru  off  from  the  markets  in  which  she  had  been  accustomed  both 
to  sell  her  exports  and  to  purchase  the  bulk  of  her  imports. 

Foreign  exchange. — So  great  was  the  demand  for  foreign  exchange 
after  the  outbreak  of  the  European  war  that  sight  drafts  on  London 
commanded  a  premium  of  15  per  cent  in  August,  1914.  The  reaction 
has  been  so  complete,  however,  due  both  to  the  prudent  administra- 
tive measures  adopted  by  the  National  Government  of  Peru  and  to 
the  fact  that  the  foreign  market  for  the  exports  of  Peru  has  been  in 


REPORT   ON    PEBU,   BOLIVIA,   AND  CH*LE.  55 

great  part  restored,  that  the  present  rate  of  premium  on  exchange 
(fall,  1916)  is  as  low  as  one-half  per  cent  for  sight  drafts  on  London. 

Export  tax. — For  the  purpose  of  creating  new  revenues  to  take  the 
place  of  those  which  had  become  unproductive  as  an  effect  of  the 
war,  the  National  Government  of  Peru  levied  an  export  tax  on  cer- 
tain raw  materials  produced  in  the  country,  including  cotton,  wool, 
sugar,  and  certain  minerals.  This  tax  becomes  effective  only  when 
the  market  price  of  the  export  has  reached  a  minimum  fixed  by  the 
law.  Due  to  the  fact  that  most  of  the  exports  of  Peru  have  com- 
manded prices  in  the  markets  of  the  world  during  the  past  year 
considerably  in  excess  of  those  usually  paid,  the  export  tax  has  been 
productive  of  revenue  beyond  the  hopes  of  its  most  ardent  advo- 
cates. 

Rise  of  price  of  exports. — The  following  statements  will  bear  out 
at  least  in  part  the  above.  Sugar  is  the  chief  agricultural  crop  grown 
in  Peru.  In  January,  1914,  Peruvian  granulated  sugar  commanded 
$2.50  per  English  hundredweight  of  112  pounds.  As  a  result  of  the 
outbreak  of  the  war  the  price  of  sugar  rose  in  August,  1914,  to  $4.86, 
and  to-day  the  price  is  $4.10  per  Spanish  quintal  of  101.46  pounds. 
The  rise  in  the  value  of  copper  as  a  result  of  the  war  has  been  even 
more  remarkable  than  that  of  sugar.  The  exports  of  copper  from 
Peru  exceed  in  total  value  any  other  mineral  exported.  In  January, 
1914,  copper  brought  66  pounds  per  tori  and  closed  in  December  of 
the  same  year  at  56.15  pounds.  In  December,  1915,  copper  was  bring- 
ing 84.5  pounds,  and  at  present  it  has  risen  to  the  unusual  figure 
of  137  pounds  per  ton. 

Freight  rates  affect  imports. — As  has  above  been  pointed  out,  the 
commerce  of  Peru  has  been  and  still  is  handicapped  by  the  very  high 
ocean  freight  rates  collected  on  all  her  exports  and  imports.  The 
fact  that  manufacturing  industries  developed  in  Peru  do  not  supply 
even  the  domestic  market  to  any  appreciable  degree  accentuates  the 
evil  effects  of  this  rise  in  freight  rates,  and  the  result  has  been  the 
total  or  partial  depletion  of  the  stocks  held  in  certain  lines  of  goods 
in  Peru.  It  has  been  stated  that  during  the  closing  of  the  Panama 
Canal  in  the  early  part  of  the  present  year  ocean  freights  to  Peru 
were  as  much  as  400  per  cent  above  normal. 

INDUSTRIES  OF   PERU. 

Mining. — Peru  occupies  a  favored  position  in  the  central  part  of 
the  Andes  and  has  within  her  borders  what  must  probably  be  con- 
ceded to  be  one  of  the  most  highly  mineralized  portions  of  the  earth's 
surface  as  yet  explored  by  men.  The  gold  mines  of  Peru  were  known 
for  the  richness  of  their  ores  even  in  the  day  of  the  Inca  and  before 
the  conquest.  To-day  the  copper  mines  of  Cerro  de  Pasco  and  Moroc- 


56  REPOKT  ON  PERU,  BOLIVIA,  AND  CHILE. 

ocho  are  amongst  the  most  valuable  producing  mines  of  the  world. 
In  addition  to  copper  and  gold,  silver,  tungsten,  and  lead  are  pro- 
duced in  considerable  quantities.  Extensive  deposits  of  zinc  and  of 
coal,  both  hard  and  soft,  are  said  to  exist  and  await  but  the  onward 
march  of  progress  and  of  population  when  they  may  be  developed 
to  advantage. 

At  the  present  time,  due  largely  to  the  European  war,  the  prices 
commanded  in  the  markets  available  by  the  minerals  exported  from 
Peru  are  greatly  in  excess  of  the  cost  of  production  and  the  earnings 
of  the  mining  companies  are  certainly  very  satisfactory. 

Agriculture. — The  voyager  who  knows  Peru  merely  from  the  view 
he  may  get  of  it  from  the  deck  of  the  steamer  sailing  along  its 
coast  can  form  no  idea  of  the  agricultural  wealth  which  lies  but 
a  few  miles  inland  behind  the  barren  desert  sands  and  naked  hills 
which  present  so  forbidding  an  aspect  along  the  coast.  Fortunately, 
the  committee  had  an  opportunity  to  get  beyond  the  desert  belt  and 
to  inspect  personally  some  of  the  valleys  made  fertile  by  irrigation 
systems  at  times  as  old  and  older  than  the  period  of  European  activi- 
ties in  America. 

Sugar,  cotton,  wool,  and  cattle  are  the  chief  production  of  the 
agriculture  of  Peru.  Cattle  raising  tsnd  wool  production  on  the 
Andean  plateau  is  being  extended,  and  the  quality  of  wool  is  being 
improved  by  experiments  in  the  cross  breeding  of  sheep  and  the 
creation  of  herds  adapted  to  the  unique  conditions  of  climate  and 
altitude  found  in  Peru.  The  cattle  industry  of  Peru,  though  old  in 
point  of  time,  is  still  in  the  infancy  of  its  development  and  seems  to 
hold  much  in  store  for  future  development. 

Of  the  agricultural  products  of  Peru,  however,  sugar  and  cotton 
are  close  rivals  for  premier  position.  In  normal  times  the  cotton 
crop  is  of  greater  value  than  the  sugar  crop,  and  the  possibility  of 
development  in  cotton  seems  to  be  greater  than  it  is  in  the  sugar 
plantations,  because  of  the  fact  that  cotton  resists  the  arid  condi- 
tions better  than  does  sugar  cane. 

The  raw  cotton  industry  of  Peru  suffered  because  of  the  European 
war  in  much  the  same  manner  as  did  our  own  cotton  industry, 
and  has  not  yet  fully  recovered.  In  Peru  both  smooth  and  rough 
staple  cotton  are  grown.  The  rough  staple,  commonly  known  as 
Peruvian  rough,  is  a  variety  of  cotton  not  grown  successfully  on  a 
large  scale  elsewhere  than  in  Peru.  It  is  well  adapted  both  because 
of  its  roughness  and  of  its  peculiar  grayish  color  for  mixing  with 
wool,  and  it  is  this  characteristic  which  gives  it  its  great  value.  The 
best  grades  of  rough  cotton  are  grown  within  a  very  limited  area  in 
the  northern  part  of  the  country,  but  a  semi  rough  cotton  is  grown  in 
other  sections. 


REPORT  ON   PERU,  BOLIVIA,  AND  CHILE.  57 

The  smooth  staple  cotton  is  of  both  the  long  staple  and  the  up- 
land varieties,  and  finds  a  good  market  in  normal  times  in  Europe, 
while  considerable  quantities  are  being  consumed  in  the  mills  estab- 
lished at  Lima  and  elsewhere  in  Peru.  In  these  mills  there  are  in 
eration  68,000  spindles  and  some  2,500  looms.  The  business  seems  to 
be  prosperous,  is  controlled  in  part  by  foreign  capital,  and  the  tend- 
ency is  to  increase  the  volume  of  the  output  which  finds  a  good  mar- 
ket in  Peru  and  adjoining  countries. 

There  are  upward  of  90  sugar  estates  in  Peru.  These  are  located 
in  the  short  valleys  along  the  Pacific  coast,  have  a  total  area  of  not 
less  than  500,000  acres,  of  which,  however,  not  more  than  100,000  are 
actually  in  cane.  The  problem  on  the  sugar  estates,  as  it  is  in  every 
other  agricultural  venture  in  Peru,  is  the  problem  of  water.  The 
farmer  has  no  rainfall  upon  which  to  depend,  and  although  his  lands 
when  duly  watered  are  of  phenomenal  fertility,  there  are  no  great 
systems  as  yet  created  for  the  preservation  of  the  limited  supply 
which  comes  to  his  lands  from  melting  snow  of  the  Andean  summits. 
The  crop  is  grown  entirely  under  irrigation,  and  the  supply  of  water 
for  irrigation  for  a  crop  like  sugar,  which  must  grow  throughout  the 
year,  is  necessarily  the  supply  available  during  the  months  of  mini- 
mum flow.  Keports  covering  three  distinct  irrigation  projects,  which 
have  for  their  purpose  the  conservation  and  economical  distribution 
of  the  available  water  supply,  were  shown  to  the  committee  by  the 
Lima  Chamber  of  Commerce.  The  seven  largest  of  these  projects 
involve  a  total  area  of  670,000  acres,  and  competent  engineers  have 
estimated  that  the  cost  of  irrigating  these  would  be  in  the  neighbor- 
hood of  $50,000,000,  or  an  average  cost  of  slightly  less  than  $75  per 
acre.  The  largest  of  these,  involving  more  than  one-half  of  the  total 
area,  that  of  Chancay,  could  be  constructed,  it  has  been  estimated,  at 
a  cost  of  approximately  $70  per  acre. 

Manufacturing. — Manufacturing  in  Peru  exists  only  on  a  small 
scale  and  has  for  its  purpose  the  supplying  only  of  the  domestic 
market.  The  cotton  and  woolen  mills  are  turning  out  good  work. 
The  tanneries,  shoe  factories,  furniture  factories,  hat  factory,  and 
other  establishments  visited  by  the  committee  are  handicapped  by  the 
limitations  of  the  domestic  market  to  which  they  cater,  are  obliged 
to  devote  their  energies  to  the  production  of  a  wide  variety  of  goods, 
and  have  riot  tlte  advantages  which  come  from  specialization. 

TRADE  RELATIONS  BETWEEN   PERU  AND  THE  UNITED  STATES. 

The  commerce  of  Peru  has  suffered  much  because  of  the  European 
war,  as  has  already  been  pointed  out  in  a  general  way.  The  United 
States  is  practically  the  only  market  in  which  Peru  may  profitably 
purchase  to-day  the  commodities  which  she  must  import,  and  the 
high  prices  prevailing  in  that  market,  as  well  as  the  abnormal 


58  REPOBT    ON    PERU,   BOLIVIA,   AND   CHILE. 

charges  for  freight  and  insurance,  limit  even  that  market  to  a  great 
extent. 

In  a  general  way  our  goods  are  being  introduced  into  Peru  in  ever- 
increasing  quantities.  Our  ability  to  hold  this  market  when  the  war 
is  over  and  normal  Conditions  are  restored  will  largely  depend  upon 
our  ability  to  adjust  our  production  to  the  new  conditions  of  compe- 
tition and  to  avail  ourselves  of  the  advantage  of  closeness  which  the 
Panama  Canal  makes  ours. 

There  is  no  doubt  that  the  investment  of  ever-increasing  amounts 
of  our  capital  in  the  productive  enterprises  of  Peru,  and  the  im- 
provement of  our  exchange  by  the  establishment  of  an  American 
bank  at  Lima,  would  tend  to  strengthen  our  trade  relations  with 
Peru  and  increase  the  bulk  of  the  commerce  between  the  two  coun- 
tries. 

DEPARTURE   FROM   LIMA. 

At  2.80  p.  m.  on  May  13,  a  group  of  distinguished  citizens,  Gov- 
ernment officials,  and  business  men  of  Lima  escorted  the  committee 
to  the  Callao  station  and  after  most  cordial  farewells  the  committee 
sailed  for  the  Peruvian  port  of  Mollendo. 

Tanibo  de  Mora  and  Pisco. — On  May  14  the  ports  of  Tambo  de 
Mora  and  Pisco  were  visited.  These  ports  are  mere  shipping  points, 
as  indeed  are  most  of  the  west  coast  ports  of  Peru.  Back  of  them, 
and  only  a  few  miles  inland,  lie  the  fertile  irrigated  vineyards  and 
olive  gardens  of  Peru.  Wine  of  good  quality,  olives,  and  dates  are 
grown  in  considerable  quantities  and  form  an  important  item  in  the 
trade  of  these  ports. 

Chala. — On  May  15  the  committee  visited  the  port  of  Chala.  As 
Paita,  the  first  Peruvian  port  visited  by  the  committee,  is  the  port 
from  which  the  rough  cotton  of  Peru  is  exported,  so  Chala  is  the 
port  from  which  the  bulk  of  the  smooth-staple  cotton  finds  its  way 
into  the  markets  of  the  world.  The  firm  of  W.  R.  Grace  &  Co.  has 
an  agency  at  Chala  which  is  of  considerable  importance  because  of 
the  fact  that  it  buys  the  bulk  of  the  raw  material  used  by  the  cotton 
mill  of  the  same  firm  which  we  had  visited  while  in  Lima.  The  com- 
mittee found  that  although  the  market  for  Peruvian  smooth-staple 
cotton  hnd  been  almost  paralyzed  for  months,  because  of  the  closing 
of  the  European  market,  there  were  evidences  of  improvement  and 
the  growers  were  more  hopeful. 

Mollendo. — On  May  16,  we  arrived  at  the  port  of  Mollendo.  This 
port  lies  exposed  to  the  southwest  winds  which  prevail  at  this  season 
and  the  landing  of  passengers  and  cargo  was  at  once  a  picturesque 
and  perilous  undertaking.  So  violent  was  the  surf  even  alongside 
the  small  pier  that  passengers  and  cargo  had  to  be  hoisted  from 
launches  and  lighters  by  the  moving  cranes  with  which  the  pier  is 


REPORT  ON   PERU,  BOLIVIA,   AND  CHILE.  59 

equipped.  It  is  said  that  a  few  miles  to  the  south  of  Mollendo  there 
exists  a  harbor  which  might  be  made  safe  at  all  seasons  of  the  year. 
The  committee  did  not  have  an  opportunity  to  investigate  this  mat- 
ter. What  we  have  seen  of  the  west  coast  of  Peru  makes  us  feel 
that  a  coastwise  longitudinal  railway  in  Peru,  which  would  connect 
the  fertile  valleys  with  one  or  two  good  shipping  points,  is  a  facility 
which  must  be  provided  before  the  foreign  trade  of  this  coast  may 
expect  to  reach  its  fullest  development. 

Mollendo,  which  for  years  enjoyed  a  practical  monopoly  as  the  out- 
let to  Bolivia,  has  in  recent  years  come  into  competition  with  the  ports 
of  Arica  and  Antofagasta,  both  in  Chilean  territory.  As  a  conse- 
quence the  bulk  of  trade  passing  through  Mollendo  has  diminished, 
and  unless  some  practical  step  is  taken  to  improve  the  harbor  at 
Mollendo,  or  to  develop  a  harbor  in  this  vicinity,  the  probability  is 
that  Mollendo  will  lose  entirely  the  importance  it  has  enjoyed  as  the 
outlet  for  the  mineral  wealth  of  the  Republic  of  Bolivia. 

At  noon,  May  17,  the  committee  left  Mollendo  by  the  regular 
train  of  the  Southern  Railway  of  Peru.  This  road  is  operated  by  the 
Peruvian  Corporation. 

ARRIVAL  IN   BOLIVIA. 

Guaqui. — Arriving  at  Guaqui  on  the  morning  of  June  19,  we  were 
met  by  the  minister  of  the  United  States  to  Bolivia,  Mr.  John  D. 
O'Rear  and  Mr.  V.  L.  Havens,  commercial  attache  of  the  United 
States  in  Chile.  Bolivia  being  included  in  the  district  of  the  com- 
mercial attache  of  Peru,  Mr.  William  F.  Montavon  had  accompanied 
the  committee  and  remained  with  it  during  its  visit  to  Bolivia  at  the 
request  of  the  committee.  Representatives  of  the  Government  of 
Bolivia  and  of  the  commercial  and  industrial  establishments  of  La 
Paz  had  likewise  come  on  to  Guaqui  to  meet  the  committee.  A 
special  train  was  ready,  and  we  at  once  set  out  for  Tiaguariaco.  the 
seat  of  what  are  probably  the  most  ancient  ruins  of  Bolivia.  Mr. 
Arturo  Posnansky,  an  authority  on  Bolivian  antiquities  and  the 
author  of  several  printed  volumes  on  the  ruins  of  Bolivia,  met  the 
committee  and  spent  several  hours  in  explaining  the  ruins  in  the 
vicinity  of  Tiapuanaco. 

La  Paz. — Arriving  at  La  Paz  the  committee  was  met  by  the  cabi- 
net of  President  Montes  of  Bolivia  and  made  welcome  in  the  name  of 
the  country.  Very  comfortable  quarters  had  been  provided  for  the 
committee,  and  nothing  had  been  left  undone  which  might  add  to 
the  success  and  pleasure  of  our  visit  to  La  Paz. 

Because  of  delays  occasioned  by  the  irregularity  of  sailings  from 
Callao,  the  committee  arrived  at  La  Paz  several  days  behind  the 
schedule  which  it  had  adopted.  As  a  consequence  the  visit  to  Bolivia 
had  to  be  made  as  brief  as  possible  and  limited  entirely  to  the  city 


60  REPORT  ON  PERU,  BOLIVIA,  AND  CHILE. 

of  La  Paz.  During  the  two  days  and  a  half  spent  in  this  interesting 
country,  every  minute  of  the  time  of  the  committee  was  taken  np  by 
a  program  prepared  by  the  Government  of  Bolivia,  and  it  is  not  prob- 
able that  the  time  could  have  been  spent  in  a  more  interesting  or 
valuable  manner. 

The  daily  press  of  La  Paz  devoted  a  great  deal  of  its  space  to  the 
work  of  the  committee  and  discussed  with  great  sympathy  the  pur- 
pose of  the  visit.  The  cordiality  of  the  reception  accorded  to  the 
committee  by  the  Government  of  Bolivia,  by  the  business  interests 
of  La  Paz,  and  by  the  people  in  general  is  eloquent  testimony  of 
warm  friendship  for  the  United  States. 

Among  the  most  interesting  events  of  May  20  was  the  audience 
granted  to  the  committee  by  His  Excellency  President  Montes.  The 
audience  was  in  the  presence  of  the  cabinet  and  took  place  in  the  main 
audience  hall  of  the  Presidential  Palace. 

The  minister  of  foreign  affairs,  Dr.  Sanjines,  entertained  the  com- 
mittee at  dinner  in  the  evening  of  May  20.  Fifty  of  the  men  most 
prominent  in  political,  military,  and  commercial  life  of  Bolivia  made 
up  the  guests. 

In  welcoming  the  members  of  the  commission,  the  host  spoke  as 
follows : 

Gentlemen,  one  year  ago,  at  the  suggestion  of  Mr.  William  Gibbs  McAdoo, 
Secretary  of  Treasury  of  the  United  States,  there  assembled  in  Washington, 
under  most  favorable  auspices,  the  First  Pan  American  Financial  Conference, 
made  up  of  delegations  from  18  Republics  of  this  continent. 

It  was  the  privilege  of  the  distinguished  representatives  of  the  respective  Gov- 
ernments, who  formed  part  of  that  assembly,  to  place  wreaths  of  flowers,  MS  a 
homage  of  admiration  and  respect  for  the  departed  great,  at  the  one-time  home 
and  now  resting  place  of  the  remains  of  the  greatest  of  Americans — Washington. 

That  ceremony,  in  which  the  feelings  of  the  people  of  the  three  Americas 
acted  in  unison,  in  rendering  cult  to  the  memory  of  a  great  man,  reveals  to  us 
symbolically  the  growing  solidarity  of  the  Nations  of  the  new  continent  and 
their  ever-increasing  tendency  to  create  new  bonds  of  union  between  themselves. 

At  the  financial  congress  of  May,  1915,  at  which  the  financial,  mercantile, 
and  transportation  features  of  the  American  Republics  were  studied,  proposi- 
tions were  acclaimed  which  are  destined  to  bring  about  uniform  systems  of 
legislation,  especially  in  regard  to  economic  and  commercial  relations. 

The  momentous  propositions  of  that  conference  have  been  further  promoted 
by  the  commission  that  met  at  Buenos  Aires  on  April  3  last.  The  highest  in- 
tellectual powers  joined  in  that  assembly  in  order  to  study  the  practicability  of 
solving  certain  far-reaching  problems  which  had  previously  been  looked  upon 
merely  as  ideals  which  it  was  more  than  difficult,  if  not  impossible,  to  carry 
out.  Nevertheless  it  was  then  shown  that  it  is  possible  to  generalize  legislation 
in  regard  to  bills  of  exchange  and  a  gold  standard  of  equal  purchasing  power 
In  all  of  the  countries  of  the  American  Continent. 

In  addition  to  the  progressive  steps  that  we  are  taking  in  the  direction  of 
adopting  uniform  laws  on  commercial  transactions,  it  is  a  pleasure  for  me  to 
dwell  on  the  helpful  work  of  intellectual  intercourse  brought  about  by  the  latest 
scientific  congresses.  1  refer  to  that  of  Santiago  de  Chile,  of  January,  1909,  and 
to  the  Washington  congress,  which  adjourned  oil  the  8th  of  January  last. 


REPORT  ON   PERU,  BOLIVIA,  AND  CHILE.  61 

Simultaneously  with  the  accomplishment  of  that  work,  for  which  our  thanks 
are  due  to  the  brilliant  initiative  of  eminent  personages  of  the  United  States 
of  America,  the  world  at  large  has  been  enabled  to  form  an  idea  of  the  bound- 
less mineral  and  agricultural  wealth  of  the  soil  of  America,  at  the  great 
Panama-Pacific  Exposition  of  1915,  the  finest  and,  maybe,  the  most  complete  of 
all  of  the  exhibits  of  nations  held  to  this  day. 

If  the  Panama  Canal  has  shortened  distances  and  made  communications 
easier  between  the  two  oceans  and  between  North  and  South  America,  if  the  in- 
ternational congresses  have  provided  an  opportunity  to  bring  about  a  contact  be- 
tween statesmen  and  thinkers  of  all  three,  Anglo-Saxon,  Spanish,  and  Lusi- 
tanian  Americas;  if  a  system  of  uniform  laws  and  rules  of  conduct  is  soon  to 
be  a  reality,  then  we  have  good  cause  to  rejoice  at  success  attained  and  to 
speak  with  entire  faith  of  Pan  Americanism  and  acclaim  it  as  a  brilliant  fore- 
runner of  the  future. 

On  many  occasions,  when  the  official  representatives  of  Bolivia  visited  the 
United  States,  their  reception  was  of  a  nature  so  brotherly  and  hospitable  that 
our  gratitude  is  pledged  to  the  charming  courtesy  of  the  American  people. 

It  is  to-day  our  good  fortune,  in  turn,  to  be  the  hosts  of  some  of  the  most  dis- 
tinguished members  of  the  highest  financial  circles  of  the  United  States.  Their 
coming  among  us  fills  us  with  joy  and  with  hope.  Oh  tendering  our  most  sincere 
and  cordial  welcome,  we  express  the  hope  that  their  stay  amidst  the  Bolivian 
family  may  be  pleasant  to  them,  and  that,  when  they  leave  this  country,  they 
shall  carry  with  them  the  best  impressions,  not  only  of  the  rural  beauties  of 
our  landscape,  of  the  imposing  heights  of  our  snow-clad  mountains,  of  the 
fabulous  wealth  of  our  mines,  but  also  of  the  hospitality  of  the  people  of 
Bolivia  and  of  their  fitness  to  assume  their  proper  share  in  the  work  of  common 
progress. 

I  ask  the  gentlemen  who  are  present  to  raise  their  glasses  and  to  drink  to 
His  Excellency  the  President  of  the  United  States,  to  Mr.  McAdoo,  to  whose 
Initiative  we  owe  the  meeting  of  the  Washington  conference  on  finance,  to  the 
minister  of  the  United  States,  and  to  each  one  of  the  distinguished  gentlemen 
who  honor  us  with  their  visit. 

Mr.  O.  M.  Clark  arose  to  reply  to  the  cordial  words  of  welcome  of 
his  excellency  the  minister  for  foreign  affairs. 

Mr.  Minister  and  gentlemen,  it  is  indeed  a  pleasure  which  I  appreciate  most 
deeply  to  have  the  privilege  of  breaking  bread  with  you  to-night.  This  is  my 
first  visit  to  South  America  and  to  your  most  interesting  country  of  Bolivia.  I 
«m  neither  an  orator  nor  a  linguist;  my  colleague,  Mr.  Wands,  is  both,  and 
I  hope  that  you  may  hear  from  him  later.  But  I  assure  you,  my  friends,  that 
sincerity  shall  be  the  compensation  which  I  shall  offer  you  for  eloquence,  and 
the  language  of  sincerity  is  humanity's  language,  the  language  of  trim  men  the 
world  over,  understood,  I  am  sure,  in  Bolivia  even  as  it  is  understood  in  my 
native  city  on  the  shores  of  the  Columbia. 

My  fellow  citizens  of  the  northwest  of  the  United  States  did  n<ft  choose  me 
as  a  member  of  this  distinguished  committee  because  of  my  qualifications  as 
an  orator.  They  chose  me  because  they  have  confidence  In  my  judgment  and 
faith  in  my  ability  to  bring  back  to  them  a  fair  and  impartial  account  of  my 
Impressions. 

Portland,  Oregon,  the  city  which  is  home  for  me,  is  one  of  the  fairest  cities 
of  our  great  country;  a  city  of  roses  and  fine  homes;  a  community  of  enter- 
prising citizens,  where  every  man  is  encouraged  to  own  his  own  honu*  un«l  to 
enjoy  a  high  degree  of  economic  independence. 


62  REPORT  ON   PERU,  BOLIVIA,  AND  CHILE. 

My  business  is  in  timber  and  the  manufacture  of  lumber.  We  have  loaded 
at  our  own  docks  many  a  steamer  destined  for  the  west  coast  and  thus  have 
contributed  in  a  practical  manner  toward  the  construction  of  your  railways 
and  other  public  improvements.  Some  of  our  timber  has  found  its  way  into 
these  picturesque  regions  of  the  Andes  and  has  even  become  a  factor  in  the 
upbuilding  of  this  interesting  city  of  La  Paz. 

Trade  to  be  permanent  and  profitable  must  be  accompanied  by  advantages  to 
both  parties;  there  must  be  reciprocity  of  profits,  our  ships  must  not  return 
empty.  If  we  are  to  sell  you  our  goods,  we  must  buy  your  minerals.  Our 
country  produces  a  surplus  of  many  commodities  which  your  country  needs — 
canned  goods,  dried  fruits,  cereals,  machinery,  timber,  and  many  others  that  I 
might  mention.  Your  country  likewise  produces  more  tin  and  copper  and 
valuable  ores  than  is  needed  here.  It  is  to  our  mutual  advantage  that  we 
exchange  the  surplus,  and  in  this  mutual  advantage  I  see  the  foundation  of  a 
profitable  commerce  between  my  country  and  yours. 

This  wonderful  Continent  of  the  Americas,  blessed  with  a  population  of 
progressive  and  enterprising  citizens,  with  political  institutions  on  a  par  with 
the  best  that  men  have  established  at  any  time,  with  a  soil,  fertile  and  produc- 
tive, and  a  climate  as  varied  as  it  is  pleasant,  can  by  our  cooperation  be  made 
economically  independent.  We  can  produce  everything  that  man  may  require, 
and  in  this  time,  when  the  Old  World  is  in  the  throes  of  a  dreadful  disaster,  it 
behooves  us,  my  friends,  to  draw  every  day  tighter  the  bonds  of  commercial  and 
social  relations  and  thus,  in  some  degree  at  least,  compensate  ourselves  for  that 
part  which  is  inevitably  ours  in  the  general  loss  and  destruction. 

In  this  connection  permit  me  to  assure  you  that  the  delegates  whom  you  have 
sent  to  the  various  Pan  American  congresses,  and  especially  to  the  financial 
conference  held  at  Washington  in  1915  and  to  the  Panama-Pacific  Exposition 
last  year  have  been  men  who,  because  of  their  high  attainments  and  culture, 
have  done  much  to  confirm  the  international  friendships  already  existing,  and 
thus  to  further  the  commercial  and  economic  solidarity  of  our  countries. 

Perhaps  the  most  pressing  problem  before  our  country,  and  one  which  is  most 
intimately  bound  up  with  the  general  problem  of  commerce,  is  the  problem  of 
transportation.  Adequate  facilities  for  the  movement  of  goods  over  water  and 
lands  must  be  provided  if  trade  is  to  reach  its  full  development.  Upon  my 
return  to  the  United  States  I  shall  devote  much  time  to  this  problem.  Of 
scarcely  less  importance  is  the  problem  of  banking  and  credits,  and  it  is  my 
firm  belief  that  the  establishment  of  a  strong  United  States  banking  institution 
here  is  one  of  the  steps  which. our  business  men  must  take  at  once.  Such  an 
Institution  would  doubtless  become  a  powerful  factor  in  stimulating  both  the 
productive  industries  and  the  commercial  enterprises  of  our  countries. 

We  shall  feel  that  our  visit  has  not  been  in  vain  if  it  has  served  to  .strengthen 
ever  so  little  the  bonds  of  friendship  which  unite  our  country  to  yours.  In  the 
name  of  the  business  men  of  the  United  States  whom  we  represent  we  invite 
you  most  cordially  to  visit  our  country  and  to  know  us  better,  for  it  is  from 
euch  mutuaf  knowledge  and  friendships  that  must  result  that  solidarity  of  the 
American  nations  to  which  we  all  aspire.  I  thank  you,  gentlemen,  for  your 
hospitality  and  for  the  many  kindnesses  we  have  received  at  your  hands. 

Mr.  Wands  spoke  in  Spanish,  proposing  the  health  of  President 
Montes  in  the  following  words: 

In  conclusion,  I  wish  to  propose  this  toast  to  a  statesman  who  has  been  the 
standard  bearer  of  every  effort  for  the  peace  and  progress  of  his  country,  a 
man  who  enjoys  the  reputation  of  being  one  of  the  most  prominent  statesmen  in 


RKPORT   ON    PKRU,   BOUVJA.   AND   CHILK.  63 

all  of  South  Anii'rica.     I  refer  t<»  His  J<]xce!l*MH!y  the  President  of  fix-  Republic 
of  Bolivia. 

On  May  21.  Mr.  and  Mrs.  Jorge  Saenz  entertained  the  committee 
at  luncheon,  and  in  the  evening  the  minister  of  the  United  States  to 
Bolivia  entertained  at  dinner.  The  minister  of  finance  spoke  as 
follows : 

Gentlemen,  the  invitation  of  his  excellency,  the  minister  of  the  United  States 
to  Bolivia,  Mr.  O'Rear,  that  this  group  of  distinguished  gentlemen  gather  at 
his  table  affords  me  an  opportunity,  beneath  the  folds  of  that  beautiful  flag 
that  floats  over  this  board,  to  address  a  brief  word  to  the  gentlemen  in  whose 
honor  this  banquet  has  been  offered. 

The  idea  of  your  visit  to  South  America  sprang  in  May,  1915,  from  one  of 
(he  delegations  to  the  Pan  American  congress  then  assembled  in  the  Capital 
of  the  illustrious  name  of  the  immortal  Washington,  just  one  year  ugo.  And 
the  motion  was  unanimously  accepted  with  applause. 

Since  then  we  expected  to  see  you  in  this  country,  and  hope  that  you  may 
receive  here,  in  your  short  visit,  only  the  impression  of  good  wishes  with 
which  we  welcome  you. 

The  importance  of  this  visit,  I  hope,  will  have  a  meaning  more  significant 
than  a  mere  usual  courtesy  and  reciprocity  in  the  relations  of  your  country 
with  her  sisters  of  this  Continent ;  something-  far  more  transcendent,  that  may 
leave  a  luminous  mark  in  your  path  of  peaceable  and  laborious  prosperity. 

There  is  in  this  country  a  vast  field  for  commerce  and  industries.  You  have 
already  seen  the  wonderful  display  of  all  the  samples  of  rich  products  that 
within  the  privileged  Bolivian  soil  are  kept.  Between  them  you  may  find  the 
very  one  that  Mr.  Clark  referred  to,  as  being  used  to  cover  the  articles  he 
offered  to  send  us  in  his  expressive  speech  last  night.  You  gentlemen  have  to 
study  and  give  your  thoughtful  consideration  to  everything  nature  offers  here, 
but  from  the  viewpoint  of  mutual  benefits,  as  that  is  the  fundamental  condi- 
tion for  the  firmest  resolutions ;  in  this  way  you  may  open  the  doors  of  South 
American  industries  and  commerce  on  bases  of  mutual  confidence  for  the  un- 
restricted interchange  in  the  usual  transactions  of  offer  and  demand. 

In  concluding,  gentlemen,  I  want  to  toast  for  your  happy  return  home,  at 
the  same  time  remembering  His  Excellency,  Secretary  McAcloo,  whom  we  would 
have  been  exceedingly  pleased  to  receive  here  the  same  as  you,  in  this  our 
country,  which,  if  it  has  no  big  material  things  to  offer,  certainly  can  extend 
to  you  the  most  frank  and  friendly  hospitality. 

All  three  members  of  the  American  commission  responded  to  the 
kind  words  of  the  minister  of  finance,  expressing  their  appreciation 
of  the  many  courtesies  extended  to  them  in  the  Bolivian  capital. 

During  the  afternoon  of  the  21st  the  committee  visited  a  museum  of 
metallurgy,  which  had  been  placed  on  exhibition  for  the  special 
benefit  of  the  committee. 

ECONOMIC  CONDITIONS. 

The  United  States  minister  furnished  the  committee  with  a  very 
comprehensive  report  on  economic  and  industrial  conditions,  and  a 
full  statement  of  the  effects  of  the  war  upon  the  country  and  the 
present  economic  conditions  was  received  by  Mr.  Jose  Luis  Tejada,  a 
prominent  banker  and  business  man  and  chairman  of  the  finance 


64  BEPORT  ON  PERU,  BOLIVIA,  AND  CHILE. 

committee  of  the  National  House  of  Deputies.    This  statement,  trans- 
lated, is  given  herewith: 

Bolivia,  like  all  of  the  young  nations  of  America,  has  not  yet  had  the  time  nor 
the  administrative  means  necessary  to  organize  a  complete  system  of  finances, 
whereby  all  the  economic  energy  of  the  country  would  be  made  to  contribute 
its  proper  share  to  the  budget  necessary  for  the  general  expenses  of  the  Gov- 
ernment. 

Up  to  the  present  its  principal  source  of  revenue  has  been  customhouse  rev- 
enues, where  duties  are  collected  upon  the  importation  of  foreign  goods  and 
where  also  are  levied  export  duties  upon  certain  raw  materials  which  leave 
the  country,  to  wit,  minerals  and  rubber.  The  revenues  of  the  customhouses 
in  normal  times  represent  somewhat  more  than  60  per  cent  of  the  total  amount 
of  the  income  of  the  National  Government. 

With  these  facts  in  mind  it  may  readily  be  appreciated  that  the  unexpected 
outbreak  of  the  great  European  war  in  the  middle  of  1914  constituted  a  very 
serious  menace  for  this  country,  and  gave  rise  to  a  general  uncertainty,  not 
only  in  Government  spheres,  but  as  well  in  those  of  commerce  and  industry. 

The  first  and  general  effect  experienced  in  the  days  following  the  outbreak 
of  hostilities  in  Europe,  which  may  be  attributed  directly  to  this  conflict,  \vas, 
in  so  far  as  Bolivia  is  concerned,  a  total  paralyzation  of  international  trade 
through  the  enforced  cessation  of  importations  and  the  impossibility  of  con- 
tinuing to  export  metals  and  rubber.  The  far-reaching  effect  of  this  can  not 
be  overestimated,  for  all  the  present  economic  organization  of  Bolivia  is  de- 
pendent upon  these  two  industries.  The  exportation  of  minerals  represents  the 
larger  part  of  the  volume  of  the  annual  exportation  of  the  country,  and  the 
value  of  these  products  serves  as  a  basis  for  the  importations  and  for  the 
settling  of  international  obligations.  When  the  war  brought. the  immediate 
cessation  of  all  exportation  it  was  synonymous  with  a  suspension  of  labor 
throughout  the  mineral  districts,  and  it  may  be  said  brought  hunger  to  the  doors 
of  all  (he  laboring  classes  as  well  as  reacting  upon  all  the  population  in  general. 

Few  nations,  therefore,  derived  greater  advantage  than  Bolivia  from  the  fact 
that  the  allies  succeeded  in  securing  the  complete  dominion  of  the  seas  within 
the  first  few  months.  This  dominion  of  the  seas  changed  the  situation  radically, 
for  by  making  navigation  to  Europe  and  the  United  States  possible  it  reopened 
to  the  Bolivian  people  the  international  ports  of  commerce,  doing  away  with  the 
fundamental  cause  of  the  general  discontent,  which  commenced  to  make  itself 
felt  through  the  laying  off  of  mining  labor  and  threatened  a  total  suspension  of 
the  work  of  this  industry. 

After  a  short  period  of  vacillation  the  export  movement  recovered  normality, 
and  to  this  extent  the  economic  situation  in  Bolivia  was  solved  with  respect  to 
the  corporations  and  industrial  enterprises  and  that  class  of  laborers  who  ore 
dependent  upon  them. 

The  increasing  needs  of  the  belligerents  at  this  time  begun  to  open  up  to 
Bolivia  a  new  horizon  of  business.  The  war  brought  with  it  as  a  natural 
result  a  constant  increase  in  the  price  of  minerals  such  as  copper  and  tin,  of 
which  Bolivia  has  rich  deposits  in  exploitation,  as  well  as  in  the  price  of  other 
metals  which  form  part  of  Bolivia's  mineral  wealth,  although  hitherto  not  rep- 
resented in  any  great  degree  among  her  exports  owing  to  the  low  prices 
previously  prevailing  for  these  metals  in  the  markets  of  the  world.  In  this 
last  category  are  included  principally  the  metals  wolfram  (tungstate  of  iron 
and  manganese),  antimony,  and  lead.  The  first  of  the  metals  named  rose 
giddily  in  price  from  ?/120  per  ton  to  the  stupendous  figure  of  T.1,100  per  ton. 


BEPOiiT   ON    PERU,   BOLIVIA,   AND  CHILE.  65 

Antimony,  which  in  times  of  peace  sold  n round  L6  per  ton  of  ore,  rose  to  f-35, 
and  lead  underwent  a  like  rise  in  price. 

In  Bolivia,  the  deposits  of  these  metals  have  been  known  for  a  long  time  to 
have  existed,  but  it  was  impossible  to  mine  them  because  of  the  difficu'ty  of 
transportation.  Once  the  prices  reached  figures  when  it  paid  to  mine  them, 
work  was  at  once  started  on  the  known  deposits,  but  the  great  value  of  these 
metals  and  their  increased  demand  stimulated  new  discoveries  and  soon  brought 
to  light  the  fact  that  along  the  whole  length  of  the  range  of  the  Andes  and  its 
spurs — that  is  to  say,  throughout  the  extent  of  territory  at  present  inhabited 
and  accessible  to  the  railroads,  there  existed  extraordinarily  abundant  and  rich 
deposits  of  antimony,  of  wolfram,  and  of  lead.  The  mining  of  these  metals  soon 
came  to  be  au  element  of  general  prosperity  for  the  country,  and  the  volume  of 
the  exports  steadily  increased.  A  few  figures  will  give  some  idea  of  this  devel- 
opment. In  1914  antimony  was  exported  only  to  the  value  of  Bs.  30,616;  In 
1915  the  exportation  increased  to  Bs.  13,442,286,  and  in  the  first  three  months 
of  this  year,  January  to  March,  the  value  of  the  antimony  exported  was 
Bs.  5,669,035,  and  every  day  greater  activity  is  noted  in  its  mining. 

Wolfram,  which  with  good  reason  has  come  to  be  known  as  black  gold, 
because  of  its  extraordinary  price,  figured  among  the  exportations  of  1914  as 
Bs.  428.300;  in  1915,  it  reached  Bs.  1.497.845,  and  in  the  three  first  months  of  the 
present  year,  it  has  reached  almost  the  figure  of  the  entire  preceding  year,  to 
wit,  Bs.  1,380,929,  which  gives  some  idea  of  its  increase. 

With  respect  to  the  metals  which  have  always  been  mined  by  the  Bolivian 
miners,  the  increase  was  likewise  appreciable.  In  1914  the  country  exported 
tin  to  the  value  of  Bs.  42,479,887.  In  1915  this  exportation  reached  Bs. 
44,885,450.  The  value  of  copper  exported  in  1914  was  Bs.  4,442,735,  and  in  1915 
it  figured  in  the  exportations  as  Bs.  14,035,311. 

This  factor  of  the  increase  of  the  country's  exports  in  so  appreciable  an 
amount,  in  comparison  with  the  normal  volume  of  the  Bolivian  exports,  brought 
about  a  very  satisfactory  situation  in  the  country's  general  condition,  but  the 
result  was  even  better  than  might  be  thought,  when  taken  in  consideration  with 
the  extraordinary  diminution  of  the  importation  of  goods  from  abroad.  For- 
tunately, the  country  had  accumulated  in  the  years  preceding  the  declaration  of 
war  a  very  large  stock  of  merchandise,  due  doubtless  to  the  liberality  of  local 
credits  which  had  characterized  the  policy  of  the  national  banks  before  the 
passage  of  the  law  in  Bolivia  limiting  to  a  single  bank,  the  Banco  de  la  Naci6n 
Boliviano,  the  right  of  note  issue.  This  heavy  and  perhaps  excessive  importa- 
tion in  advance  has  prevented  the  Bolivian  people  from  suffering  during  these 
war  times  any  scarcity  in  imported  goods,  or  any  rise  in  their  price,  and  at  the 
same  time  the  merchants  have  been  able  to  dispose  slowly  and  profitably  of 
their  merchandise,  which  perhaps  could  not  have  met  the  competition  of 
imported  goods  of  more  recent  manufacture  if  the  normal  movement  of  imports 
had  continued. 

Synthesizing,  then,  the  economic  situation  of  Bolivia,  it  may  be  said  that  the 
country,  in  1915,  as  a  result  of  the  war,  has  produced  and  exported  more  than 
in  any  previous  year  since  the  foundation  of  the  Republic,  and  at  the  same  time 
there  never  has  been  a  less  amount  of  foreign  goods  imported  in  proportion  to 
the  exports.  The  relative  figures  are  as  follows: 

1914 — Importation Bs.  39,  761,  222 

Exportation (^  sol,  5G2 

1915 — Importation 22,  574,  566 

Exportation 95.  210,  ?"r« 

1063—18 5 


66  REPORT  ON   PERU,  BOLIVIA,  AND  CHILE. 

A  comparison  of  these  figures  will  indicate  with  sufficient  precision  just  what 
prosperity  the  European  war  has  brought  to  Bolivia's  business.  Since  exports 
rose  above  any  previous  year,  while  imports  fell  off  about  Bs.  18,000,000,  the 
country  has  never  had  greater  resources  with  which  to  pay  off  old  debts  and 
accumulate  greater  wealth.  An  unequivocal  symptom  of  the  comfortable  cir- 
cumstances in  which  the  country  finds  itself,  may  be  had  from  the  foreign 
exchange  quotations.  At  the  outbreak  of  the  war  and  during  the  first  months 
of  uncertainty  which  followed,  the  value  of  the  Boliviano  dropped  to  14  pence, 
but  under  the  influence  of  increasing  exports  and  small  imports,  it  has  risen 
steadily  until  it  has  reached,  not  only  the  legal  par  of  19&  pence,  but  even  a 
premium  of  4  per  cent  in  favor  of  the  Boliviano,  or  a  quotation  of  up  to  20 
pence  per  Boliviano. 

These  seem  to  be  the  culminating  factors  of  the  situation  in  so  far  as  the 
business  of  imports  and  exports  is  concerned,  that  is  to  say,  the  two  poles  of 
the  economic  life  of  the  nation,  and  from  them  have  issued  a  prosperity  shared 
in  by  everybody  in  general,  due  largely  to  the  increased  wealth  produced  by 
the  mining  operations,  likewise  a  constant  demand  for  labor  and  high  wages, 
and  the  disposal,  sknvly  but  profitably,  of  merchandise  imported  in  previous 
years  in  imprudent  quantities,  all  of  which  have  contributed  to  the  maintenance 
of  the  general  prosperity.  It  is  not  an  exaggeration  to  say  that  business  in 
general  and  everybody  connected  with  it  has  seldom  enjoyed  a  period  of  greater 
activity  in  production  or  better  remuneration  for  his  labor. 

When  we  recall,  however,  the  defective  organization  of  our  public  finance,  it 
ts  not  to  be  wondered  at  that  the  reverse  of  this  very  satisfactory  state  of 
affairs  for  individuals  obtains  in  so  far  as  the  Government  is  concerned.  The 
small  volume  of  the  imports  restricted  in  even  larger  proportion  the  custom- 
house duties,  which  is  the  principal  source  of  the  national  revenues.  Imports 
consisted  chiefly  of  food  products,  which  is  the  class  of  imports  paying  the 
smallest  rates  in  the  tariff.  This  source  of  revenue  failing,  the  resources  of  the 
nation  diminished  rapidly  from  Bs.  22,000,000,  the  amount  collected  in  the  last 
year  of  peace,  to  the  very  low  figure  of  Bs.  15,840,216,  collected  in  1914,  and  to 
a  still  lower  figure  in  1915  of  under  Bs.  15,000,000. 

From  the  very  first,  therefore,  the  Government  has  been  in  straitened  cir- 
cumstances, arid  although  the  situation  improved  somewhat  with  the  possibility 
of  importing  on  a  small  scale  and  of  exporting  in  the  satisfactory  way  already 
outlined,  still,  a  serious  upsetting  in  the  conduct  of  the  Government's  affairs 
could  not  be  avoided.  Fortunately,  the  Government,  the  Congress,  and  the 
people  appreciated  from  the  first  that  a  time  had  come  when  it  was  necessary 
to  make  some  sacrifice  in  order  not  to  compromise  the  future  of  the  country. 
By  common  consent,  therefore,  there  was  agreed  upon  a  simple  plan  of  expendi- 
ture of  the  Government's  revenues  more  or  less  along  the  following  lines : 

(1)  To  pay  religiously,  and  at  whatever  sacrifice,  the  service  of  the  foreign 
debt,  of  the  internal  debt,  and  of  the  guaranties  in  force  for  the  railroads. 

(2)  To  suspend  all  public  work  which  did  not  have  furfcls  of  its  own. 

(3)  Finally,  to  effect  economies  in  all  governmental  services  and  reduce, 
temporarily,  30  per  cent,  later  20  per  cent,  the  salaries  of  public  employees.1 

This  program  has  been  rigidly  adhered  to,  and  Bolivia  to-day  boasts  of  hav- 
ing met  its  debts  as  promptly  as  in  normal  times.  The  other  economies  have 
also  been  effected,  and  at  present  it  is  hoped  that  the  Government's  difficulties 
will  be  solved  without  any  other  measure  than  the  issue  of  notes  to  be  paid  off 
in  succeeding  years  by  acceptance  in  the  customhouses  in  definite  proportions, 

1  At  present,  from  5  per  cent  to  20  p«r  cent. 


EEPOBT  ON   PP:HU,  BOLIVIA,  AND  CHILE.  67 

the  issue,  it  Is  hoped,  not  to  exceed  Bs.  10,000,000,  and  to  be  fully  paid  within 
five  years  as  a  maximum. 

Bolivia  has  learned  many  lessons  from  the  war.  It  has  called  attention, 
none  too  gently,  to  the  defective  organization  of  its  finances,  based  as  they 
are  upon  the  income  of  customhouses  and  exposed  to  brusque  variations.  It 
has,  furthermore,  called  attention  to  the  urgent  necessity  of  stimulating  other 
industries  which  can  contribute  something  to  the  life  of  its  inhabitants,  avoid- 
ing the  importation  of  food  products  and  other  goods  which  the  country  can 
produce  itself  on  a  great  scale.  Finally,  it  has  demonstrated  the  great  im- 
portance of  the  railroads,  without  which  it  would  have  been  impossible  to  in- 
crease within  a  few  months  its  exports  of  metals,  and  without  which  it  would 
be  equally  impossible  to  stimulate  the  development  of  other  industries  in  regions 
remote  from  the  great  centers  of  consumption.  These  lessons  can  not  but  have 
a  beneficial  effect  upon  the  future  of  Bolivia. 

The  Government  and  the  people  are  determined  upon  changing  this  situation 
which  has  brought  on  them  such  great  disturbances  during  the  present  state 
of  war  in  Europe.  For  this  reason,  they  are  firmly  determined  to  develop  the 
agriculture  of  the  country,  to  make  it  independent  of  foreign  markets  in  its 
consumption  of  sugar,  alcohol,  meat,  and  grains.  At  present,  with  its  own 
funds,  the  government  of  the  department  of  La  Paz  is  extending  a  railroad 
toward  the  fertile  Yungas  region,  which,  once  it  has  a  railroad,  will  open  for 
production  a  very  extensive  and  rich  area.  The  work  on  the  Tupiza-Quiaca 
Railroad  is  going  forward  with  enthusiasm,  in  order  that  we  may  have  direct 
communication  with  the  centers  of  production  of  the  Argentine,  and  also  to 
facilitate  the  exportation  of  our  products  to  the  Atlantic  Ocean. 

DEPARTURE  FROM  LA  PAZ. 

On  the  morning  of  May  22,  the  members  of  the  committee  said 
good-bye  to  the  Bolivian  officials  and  other  friends  by  whom  they  had 
been  so  hospitably  entertained,  and  in  the  afternoon  they  left  La  Paz 
on  the  long  journey  to  the  coast.  The  trip  was  made  in  a  special 
train  generously  placed  at  their  disposal  by  the  Bolivian  Govern- 
ment. All  the  ministers,  many  of  the  leading  men  of  the  country, 
and  a  large  public  were  at  the  station  to  bid  us  good-bye.  The 
United  States  minister,  representatives  of  the  ministries  of  foreign 
affairs  and  of  the  treasury  accompanied  us  to  Viacha,  a  ride  of  about 
one  hour.  We  left  Viacha,  the  junction  of  the  three  railways  enter- 
ing Bolivia,  at  2.30  p.  m.  Final  farewells  were  said  at  this  point 
and  the  long  journey  to  Antofagasta  across  the  desert  was  begun. 
There  was  little  of  note  along  the  railway  beyond  the  continual 
barrenness  of  the  ground,  only  scratched  here  and  there  by  the  most 
rudimentary  implements.  The  temperature  fell  continuously. 
Heavy  overcoats  were  necessary  and  even  then  the  cold  seemed  very 
piercing.  The  train  arrived  at  Oruro  about  9  p.  m.  While  waiting 
for  the  necessary  train  movements,  calls  were  received  from  Meliton 
Lemaitre,  the  prefect  of  Oruro,  and  his  secretary,  Mr.  Cabezas  Villa, 
as  well  as  the  traffic  manager  of  the  railwav.  Invitations  were  ex- 


68  REPORT  OK    PERU,  BOLIVIA,   AND  CHILE. 

tended  to  visit  the  local  mineral  exhibit,  but  owing  to  the  unforeseen 
delays  which  had  been  encountered  it  was  thought  best  to  continue 
at  once. 

The  special  train  placed  at  our  disposal  consisted  of  a  sleeping  car, 
a  dining  car,  and  a  baggage  car.  The  night  was  unusually  cold  and 
heavy  winds  were  blowing,  but  we  arrived  at  Uyuni,  the  junction 
of  the  Antofagasta  30-irich  gauge  and  of  the  Bolivian  meter  gauge,  at 
au  early  hour  on  the  morning  of  Tuesday,  May  23. 

AUKIYAL  IN    CHIUC. 

Antofagasta. — We  arrived  in  Antofagasta  at  1.30  p.  in.  and  were 
received  by  the  United  States  consul,  Mr.  Thomas  W.  Voetter,  the 
chief  of  the  Antofagasta  custom  guard  and  inspection,  Dr.  Eliseo 
Pinto. 

Telegrams  were  sent  from  Antofagasta  to  Bolivia  thanking  the 
Bolivian  Government  for  their  many  kind  and  considerate  attentions, 
and  also  to  the  United  States  Embassy  in  Santiago,  informing  them 
of  the  expected  sailing  hour  from  Antofagasta.  The  party  called  on 
the  Intendente  of  Antofagasta,  the  head  of  the  local  government,  and 
on  Mr.  Avalos,  the  administrator,  or  head  of  the  Antofagasta  custom 
service.  Mr.  Avalos  took  the  party  through  all  the  storerooms,  offices, 
and  different  sections  of  the  customhouse.  Space  is  so  limited  that 
oftimes  goods  are  piled  in  the  street  or  left  on  the  clocks  where 
proper  watching  is  almost  impossible.  Landing  is  done  by  launches 
in  a  sea  which  is  never  really  smooth  and  there  is  a  crying  demand 
for  the  construction  of  first-class  port  works.  Much  of  the  cost  for 
new  customhouse  buildings  would  be  covered  by  the  reclamation  of 
land. 

Coquimbo. — The  party  went  aboard  the  steamship  Flora  at  1  p.  m., . 
being  conveyed  to  the  ship  by  the  customhouse  launch,  in  charge  of  ! 
Mr.  Pinto.    The  trip  along  the  coast  was  uneventful.    We  arrived  at  * 
Coquimbo  at  6  a.  m.  on  Saturday,  May  27.    This  was  the  first  port  south  I 
of   Callao   where   any   green   things   were   seen.     It   is   about   the  j 
northern  limit  of  the  Chilean  agricultural  region,  and  is  the  center  of  j 
a  fairly  rich  copper  mining  region,  equipped  with  a  good  smelter, 
and  only  about  35  miles  south  of  the  Tofo  iron  mines  operated  by  the 
Bethlehem  Steel  Co.    The  iron  is  68  per  cent  pure  and  the  company 
expects  to  get  out  about  1,500,000  tons  per  year.    They  are  now  elec-  j 
trifying  their  private  railway,  which  is  about  24  miles  long,  connect- 
ing their  mines  and  the  artificial  port  they  have  constructed.     Co- 
quimbo is  a  port  on  a  tranquil  bay  and  is  the  outlet  for  the  Province 
of  the  same  name.    The  principal  city  of  the  Province  is  Serena,  about 
half  an  hour's  ride  on  the  railway,  which  runs  trains  at  frequent  in- 
tervals.   The  party  went  ashore  here,  sent  various  telegrams  ahead 


REPORT  ON    PERU,   BOLIVIA,   AND  CHII,K.  69 

advising  of  our  expected  arrival  in  Valparaiso,  and  called  on  the 
newly  appointed  American  consular  agent,  Mr.  F.  J.  Harper,  head  of 
the  local  branch  of  W.  R.  Grace  &  Co.  Mr.  Harper  later  called  on  us 
aboard  the  Flora  at  8.30  a.  m.,  and  spent  an  hour  discussing  local 
business  conditions,  which  was  highly  interesting  to  the  committee. 
We  sailed  at  10  a.  m.,  the  sea  being  unusually  calm  for  this -section, 
but  the  fall  in  temperature,  due  to  the  continual  southerly  advance, 
and  to  our  entrance  into  the  cold,  northbound  Humboldt  current,  was 
(juite  noticeable.  For  a  number  of  hours  during  the  afternoon  it  was 
necessary  to  whistle  and  ring  the  bell,  because  of  the  dense  fog,  but 
little  danger  was  expected,  because  of  the  small  number  of  ships 
present  along  the  course  at  this  time.  By  evening  the  fog  had  lifted 
and  a  few  stars  were  visible. 

Valparaiso. — On  Sunday,  May  28,  we  arrived  at  the  port  of  Val- 
paraiso shortly  after  sunrise  and  within  a  very  short  time  after  drop- 
ping anchor  the  representative  of  the  intendente,  or  chief  of  the  local 
government,  called  with  a  launch  and  arranged  for  our  immediate 
transfer  to  shore  and  the  Royal  Hotel. 

Santiago. — The  committee  left  Valparaiso  at  8.30  in  the  morning 
of  May  30.  in  a  special  car.  which  the  Chilean  Government  had  most 
graciously  placed  at  their  disposal.  Lunch  was  secured  at  Llay-Llay. 
the  stations  where  the  railways  branch,  one  going  to  Santiago,  and 
the  other  to  Buenos  Aires.  The  guests  arrived  in  Santiago  at  2  p.  in., 
and  were  received  in  the  station  by  Mr.  Sanchez  Mira,  of  the  treas- 
ury department,  Mr.  Boomer  of  the  office  of  the  commercial  attache, 
and  Mr.  Frederic  Wightman,  head  of  the  house  of  W.  R.  Grace  & 
Co.  in  Chile.  The  party  immediately  went  to  the  Grand  Hotel. 

Two  days  were  spent  in  visiting  the  industrial  plants  of  Santiago 
and  in  an  interesting  conference  with  the  minister  of  finance.  The 
committee  also  had  the  good  fortune  to  be  invited  to  attend  the  open- 
ing of  Congress,  at  wrhich  function  the  President  of  Chile  read  his 
annual  message. 

On  Friday,  June  2,  the  ambassador  of  the  United  States,  Mr. 
Joseph  IT.  Shea,  entertained  at  luncheon  in  the  embassy  Mr.  Augusto 
Villanueva,  Mr.  Luis  Izquierdo,  and  Mr.  Gonzalo  Vergara  Bulnes, 
Chilean  delegates  to  the  Pan  American  Financial  Conference  in 
Washington;  Mr.  Clark  and  Mr.  Wands,  members  of  the  return 
visit  committee;  Mr.  George  T.  Summer lin,  first  secretary  of  the 
embassy;  Mr.  V.  L.  Havens,  commercial  attache;  and  Mr.  Johnson, 
second  secretary  of  the  embassy. 

At  3  o'clock  the  same  afternoon  the  commercial  attache  accom- 
panied Mr.  Clark  and  Mr.  Wands  to  visit  the  minister  of  the  treas- 
ury, Mr.  Armando  Quezada  A.,  with  whom  an  hour  was  spent  very 
pleasantly.  The  minister  then  took  the  party  to  call  on  the  Presi- 
dent of  the  Republic. 


70  REPOKT  ON   PERU,  BOLIVIA,  AND  CHILE. 

On  Sunday,  an  interesting  luncheon  was  given  to  the  committee 
by  Seiiores  Villanueva,  Izquierdo,  and  Vergara  in  the  Union  Club. 

CHILE   AND   THE   WAR. 

During  its  short  stay  in  Chile  the  committee  was  able  to  secure 
considerable  information  about  the  country's  economic  situation. 

Before  the  outbreak  of  the  European  war  in  August,  1914,  Chile 
was  commercially  and  financially  prosperous,  a  notable  development 
having  taken  place  in  the  country  during  the  few  years  prior  to  the 
war. 

Serious  difficulties  arose  with  the  outbreak  of  hostilities  in  Europe 
which  paralyzed  commerce  and  industry.  These  difficulties  were 
as  follows: 

(a)  Through  the  stagnation  of  shipping,  owing  to  the  presence 
of  Von  Spec's  squadron  and  a  British  fleet  on  the  Chilean  coast. 

(6)  The  complete  suspension  of  all  banking  facilities  and  the 
prohibition  of  the  export  of  practically  everything  from  this  coun- 
try, with  the  exception  of  nitrate.  Furthermore,  the  general  condi- 
tions were  very  much  aggravated  by  the  fact  that  German  banks  and 
German  firms  had  been  considerable  drawers  of  bills  of  exchange  on 
British  institutions.  These  documents  were  neither  accepted  nor  met 
when  presented  for  payment,  because  of  British  decrees  on  this  sub- 
ject. The  bills  were  formally  protested  and  returned  to  Chile. 

(c)  The  momentary  paralyzation  of  financial  matters  created  con- 
siderable disorder  and  led  to  the  closing  of  most  of  the  nitrate  and 
other  industries  in  the  country. 

The  currency  question  in  Chile  has  not  been  affected  or  modified 
in  any  way  since  the  outbreak  of  the  war.  The  circulating  medium 
in  Chile  to-day  is  nominally  150,000,000  Chilean  pesos,  with  a  few 
millions  in  addition  which  have  been  taken  out  on  deposits  made  by 
banks  to  increase  their  holdings  under  the  law  of  May  11, 1912. 

Financial  problems  practically  solved  themselves  in  regard  to  the 
bills  drawn  by  German  on  British  institutions  by  the  bills  being 
returned  to  Chile  protested  and  met  in  various  ways.  The  drawing 
power  is  practically  now  in  the  hands  of  Chilean  and  British  banks 
and  British  and  American  firms. 

The  effect  of  the  war  on  exchange  was  naturally  extremely  serious. 
Prior  to  the  4th  of  August,  1914,  the  rate  of  exchange  ruling  was 
8td.  and  immediately  after  that  date,  owing  to  the  scarcity  of  notes, 
which  had  been  hoarded  and  withdrawn  from  circulation,  exchange 
rose  steadily  until  it  touched  9f d.,  afterwards  falling  away  to  6Jd., 
the  lowest  rate,  which  was  reached  September  15,  1914.  Since  then 
it  has  gradually  improved  as  the  nitrate  enterprises  renewed  work 
with  the  demand  for  nitrate. 


REPORT  ON    PERU,  BOLIVIA,  AND  CHILE.  71 

A  law  was  passed  just  after  the  outbreak  of  hostilities  with  the 
object  of  assisting  nitrate  producers  and  to  encourage  them  to  con- 
tinue producing  and  to  build  up  and  hold  large  stocks.  This  law, 
which  is  dated  August  12,  1914,  allowed  for  a  Government  advance 
of  $3  Chilean  currency  per  quintal  on  nitrate  manufactured  and 
placed  on  the  nitrate  fields  and  $4  Chilean  currency  per  quintal  of 
nitrate  placed  in  port  ready  for  shipment.  The  object  of  this  was  to 
prevent  people  being  thrown  out  of  employment.  While  these  facili- 
ties were  taken  advantage  of  by  several  of  the  larger  Chilean  pro- 
ducing companies,  the  general  effect  of  the  war  on  the  industry 
during  the  first  six  months  of  the  war  was  the  almost  total  suspension 
of  the  export  of  nitrate  and  the  consequent  closing  down  of  about 
80  per  cent  of  the  nitrate  plants.  This  necessitated  the  transporta- 
tion of  a  large  part  of  the  population  from  the  nitrate  fields  in 
the  north  to  the  agricultural  fields  in  the  south  at  the  expense  of 
the  Government  and  a  total  suspension  of  all  traffic  in  shipments  of 
supplies  of  produce  from  the  southern  to  the  northern  ports.  The 
nitrate  industry  began  to  revive  early  in  the  month  of  March,  1915, 
and  since  then  it  has  steadily  improved  until  we  have  to-day  larger 
shipments  than  before  the  war. 

As  the  country  had  to  live  on  its  own  resources  agriculture  took  a 
spurt,  and  the  keenest  endeavors  were  made  to  increase  the  production 
of  all  consumable  articles.  Unfortunately  for  Chile,  however,  it 
proved  to  be  a  bad  wheat  year  and  a  heavy  importation  took  place 
for  the  supplies  of  1915,  wheat  touching  famine  prices.  Potatoes 
were  also  scarce.  The  export  of  all  agricultural  products  was  totally 
suspended  by  the  Government  in  order  to  provide  for  the  necessities 
of  the  country.  Subsequently,  however,  permits  were  granted  for  the 
shipment  of  a  few  cargoes  of  oats  only  to  Australia,  owing  to  the 
excessive  quantity  of  this  cereal  being  left  in  the  country. 

OBSERVATIONS. 

We  realize  that  our  trip  was  too  rapid  to  permit  of  a  thorough 
study  of  fundamental  conditions.  However,  every  advantage  was 
taken  of  opportunities  offered  to  obtain  a  correct  view  of  how  the 
west  coast  countries  met  the  problems  arising  as  a  result  of  the 
European  war;  and  in  concluding  this  renort,  we  venture  to  make 
the  following  observations: 

(1)  Latin  America  to-day  offers  opportunities  on  a  basis  never 
presented  before,  not  only  for  the  extension  of  our  trade  in  foreign 
markets,  but  also  for  the  investment  of  United  States  capital  in 
profitable  enterprises.  There  is  no  reason  why  these  investments 
should  not  be  properly  safeguarded.  The  committee  believes  that 
special  attention  should  be  given  to  the  financing  of  contracts  insur- 
ing a  market  for  American  materials  and  the  employment  of 
American  skill  and  labor. 


72  REPORT  ON   PERU,  BOLIVIA,  AND  CHILE. 

In  financing  enterprises  of  a  pioneering  nature,  involving  the  de- 
velopment of  raw  products,  care  should  be  exercised  to  secure  guar- 
antees against  duties  or  other  taxes  being  raised  for  a  term  of  years. 
With  these  guarantees  and  an  assured  labor  supply  there  would  seem 
to  be  no  reason  why  United  States  capital  should  not  be  profitably 
employed. 

We  must  not  lose  sight  of  the  fact  that  South  America  is  destined 
to  be  one  of  the  great  sources  for  the  food  supply  of  the  more  densely 
settled  countries. 

(2)  The  committee  recommends  the  publication  by  the  Depart- 
ment of  Commerce  or  the  Pan  American  Union  of  a  group  of  small 
handbooks,  one  for  each  Latin-American  country,  presenting  briefly 
and  readably  the  up-to-date  fundamental  facts  of  each  country.    It 
would  not  be  necessary  to  give  more  than  2,000  to  3,000  words  to  the 
smaller  countries  and  6,000  to  7,000  words  to  the  larger  countries. 
With  these  handbooks  as  a  foundation,  details  of  industries  and  com- 
merce could  be  issued  from  time  to  time  in  pamphlet  form. 

In  making  this  recommendation  the  committee  does  not  wish  to 
give  the  impression  that  it  undervalues  ths  many  excellent  reports 
already  published  by  Government  departments.  It  is  of  the  opinion, 
however,  that  a  great  deal  is  being  poured  into  an  already  overfull 
reservoir.  If  he  has  the  voluminous  reports  already  available,  the 
average  American  business  man  has  not  the  time  to  go  through  them 
all  on  the  chance  of  finding  a  point  of  value  or  interest.  It  is  the 
belief  of  the  committee  that  there  are  enough  American  manufac- 
turers and  merchants  who  want  to  do  a  foreign  trade  who  would 
welcome  an  elementary  statement  of  fundamental  conditions,  such 
as  is  contemplated  in  this  recommendation.  A  great  deal  of  the  in- 
formation already  on  hand  would  be  found  of  value  in  the  prepara- 
tion of  the  handbooks  suggested,  but  it  should  be  most  carefully  con- 
densed and  systematized. 

(3)  The  committee  strongly  commends  the  efforts  that  are  being 
made  for  the  appointment  of  citizens  of  the  United  States  as  con- 
sular agents  in  every  case  possible.     Undoubtedly   the  complete 
Americanization  of  the  consular  service  at  the  present  moment  is  not 
practicable,  but  all  steps  leading  in  that  direction  are  deserving  of 
congressional  support. 

ERNEST  H.  WAKDS,  Chairman. 
NOVEMBER  1,  1916. 


REPORT  OF  FINANCIAL  AND  COMMERCIAL  COMMISSION 
TO  CENTRAL  AMERICA. 

Hon.  W.  G.  McADOo, 

Secretary  of  the  Treasury, 

Washington,  D.  C. 

SIR:  Pursuant  to  a  resolution  proposed  and  adopted  by  the  dele- 
gates of  the  Latin  American  Republics  participating  in  the  Pan 
American  Financial  Conference  held  at  Washington,  May,  1915,  a 
committee  styled  the  Latin  American  Return  Visit  Committee  was 
appointed  to  make  the  necessary  arrangements  for  a  visit  to  all  the 
Latin  American  countries,  which  visit  it  was  believed  would  "  prove 
of  the  greatest  value  in  strengthening  and  improving  our  financial, 
commercial,  and  political  relationships  with  those  countries." 

The  first  of  the  commissions  appointed  was  to  visit  Panama  and 
the  five  Central  American  Republics  and  consisted  of  the  following 
persons :  Mr.  Lamar  C.  Quintero,  of  New  Orleans,  La.,  general  attor- 
ney for  tropical  divisions  of  the  United  Fruit  Co.;  Mr.  Ernest  E. 
Ling,  manager  of  the  foreign-trade  department,  the  National  City 
Bank,  New  York  City,  N.  Y. ;  Mr.  John  Clausen,  manager  of  the  for- 
eign department, -the  Crocker  National  Bank,  San  Francisco,  Cal.; 
Mr.  J.  P.  Ripley,  engineer,  of  the  engineering  firm  of  J.  G.  White  & 
Co.,  New  York  City,  N.  Y. ;  Mr.  Thomas  J.  Walker,  vice  president 
of  the  First  National  Bank,  San  Fernando,  Cal.;  Mr.  Roger  W. 
Babson,  president,  Babson  Statistical  Corporation,  Wellesley  Hills, 
Mass. 

The  above  committee,  with  the  exception  of  Mr.  Babson,  met  at 
New  Orleans  during  the  session  of  the  Foreign  Trade  Council,  in  Jan- 
uary, 1916,  and  elected  Mr.  Quintero  as  chairman  of  the  committee. 
Mr.  Alfred  A.  Biddle,  of  Philadelphia,  Pa.,  was  appointed  secretary. 

Mr.  Babson  did  not  join  the  party  until  its  arrival  in  Guatemala. 

The  party,  known  as  the  Financial  and  Commercial  Commission  to 
Central  America,  sailed  from  New  Orleans  on  February  2,  1916,  and 
the  departure  was  made  the  occasion  of  an  active  demonstration  by 
the  people  of  New  Orleans,  indicating  their  live  interest  in  move- 
ments affecting  the  interests  of  the  country  in  general. 

The  itinerary  of  the  party  was  as  follows : 

February  2.  Sailed  from  New  Orleans  on  United  Fruit  steamship  Abangarez. 
February  9.  Arrived  Cristobal  and  proceeded  by  rail  to  Panama  City,  arriving1 
the  same  day. 

73 


74  REPOKT   ON    CENTKAL  AMERICA. 

February  10.  Left  Panama  City  and  went  by  rail  to  Cristobal  and  sailed  on 
United  Fruit  steamship  Cartago  for  Port  Limon,  Costa  Rica.  (The  stay  in 
Panama  was  very  brief  on  account  of  a  five-day  delay  occasioned  by  an  accident 
to  the  steamship  Abangarez  in  New  Orleans.) 

February  11.  Arrived  Port  Lim(5n,  Costa  Rica. 

February  12.  Proceeded  to  San  Jose",  capital  of  Costa  Rica,  arriving  same 
day. 

February  19.  Left  San  Jose"  by  rail  and  went  to  Puntareims  on  the  Pacific 
coast  and  embarked  on  the  U.  S.  S.  Cleveland. 

February  20.  Arrived  Corinto,  Nicaragua. 

February  21.  Proceeded  by  rail  from  Corinto  to  Managua,  the  capital  of 
Nicaragua. 

February  25.  Left  Managua,  went  to  Corinto  by  rail,  and  sailed  on  the 
Cleveland. 

February  26.  Arrived  Amapala,  Honduras. 

February  27.  Left  Amapala  and  went  by  motor  boat  and  automobile  to 
Tegucigalpa,  the  capital  city  of  Honduras. 

March  6.  Returned  to  Amapala  and  sailed  on  the  Cleveland. 

March  7.  Arrived  Acajutla,  Salvador,  and  proceeded  by  rail  to  Son  Salvador, 
the  capital  city,  arriving  the  same  day. 

March  14.  Returned  to  Acajutla  and  sailed  on  the  Cleveland. 

March  15.  Arrived  San  Jose",  Guatemala,  and  proceeded  by  rail  to  Guatemala 
City,  the  capital  of  Guatemala,  arriving  the  same  day. 

March  24.  Left  Guatemala  City  by  rail  and  went  to  Puerto  Barrios,  on  the 
Atlantic  coast  of  Guatemala,  arriving  the  same  day. 

March  25.  Sailed  on  the  United  Fruit  Co.  steamship  Sixaola,  returning  to 
New  York,  via  Port  Antonio,  Jamaica,  and  Santiago  de  Cuba. 

April  3.  Arrived  New  York  City. 

It  will  be  noted  that  the  stay  in  each  Republic  was  short,  particu- 
larly in  Panama,  and  our  investigations  of  financial  and  commercial 
conditions  were  seriously  restricted  in  their  scope  on  this  account. 

PANAMA. 

The  commission  reached  Colon,  Panama,  on  February  8,  1916,  and 
was  received  by  the  governor,  representing  the  Government.  A 
special  car  carried  the  party  across  the  Isthmus,  stopping  at  various 
points  along  the  route  to  view  the  canal  locks.  A  committee  con- 
sisting of  the  minister  of  finance,  the  minister  of  foreign  affairs,  the 
secretary  to  the  President,  and  a  number  of  prominent  citizens  wel- 
comed us  at  the  station  and  took  us  to  the  hotel. 

The  United  States  charge  d'affaires,  Mr.  Willing  Spencer,  ar- 
ranged for  an  official  visit  to  the  President  and  the  minister  of 
finance,  and  also  for  a  meeting  with  the  association  of  commerce. 

We  learned  that  the  Government  had  established  a  national  sec- 
tion of  the  International  High  Commission,  composed  of  prominent 
merchants  and  financiers,  to  work  in  harmony  with  the  United 
States  section  at  Washington  on  questions  of  uniform  legislation, 
and  that  a  code  commission  had  just  completed  a  set  of  new  codes, 
suitable  to  the  conditions  of  the  country. 


BEPOBT  ON   CENTRAL  AMERICA.  75 

There  was  considerable  complaint  about  the  canal  commissaries 
and  storehouses,  which  enter  into  serious  competition  with  the  mer- 
chants of  the  Republic  of  Panama,  being  able  to  undersell  because 
of  nonpayment  of  duties. 

An  afternoon  was  pleasantly  spent  viewing  the  Panama  Exposi- 
tion, with  its  beautiful  buildings  and  its  interesting  exhibits.  At 
night  a  banquet  was  tendered  to  the  commission  by  the  association 
of  commerce,  and  there  was  an  exchange  of  views  that  the  friendly 
relations  at  present  existing  between  the  two  countries  would  be 
further  developed  as  a  result  of  the  visit  of  the  commission. 

The  Eepublic  covers  an  area  of  about  32,000  square  miles,  and  has 
a  population  of  about  450,000.  The  climate  is  very  hot,  more  so  than 
in  any  of  the  other  Central  American  Eepublics,  due  to  its  being 
the  most  southerly  of  the  group  and  to  its  generally  lower  altitudes. 
It  is  unique  in  that  it  is  cut  in  two  by  the  Canal  Zone,  over  which 
the  United  States  has  jurisdiction.  Ths  capital  city  is  Panama, 
located  on  the  Pacific  side  and  having  a  population  of  about  38,000. 

Of  a  total  railway  mileage  of  about  150  miles,  the  only  line  of 
importance  is  the  Panama  Railroad,  which  is  owned  by  the  United 
States  and  runs  across  the  Isthmus  from  Colon  to  Panama,  a  dis- 
tance of  48  miles.  This  line  is  very  well  built,  having  a  gauge  of 
5  feet,  about  80-pound  steel,  and  gravel  ballast;  a  considerabb 
part  of  the  track  is  built  with  native  lignum-vitse  ties  and  screw 
spikes.  It  is  spanned  over  most  of  its  length  by  steel  bridges  carry- 
ing two  3-phase  electric  circuits  which  transmit  power  used  by 
the  canal  commission  for  various  purposes.  It  is  probable  that  this 
was  done  with  the  idea  of  ultimately  changing  over  to  electric  oper- 
ation, a  change  which,  from  an  economic  point  of  view,  must  be  very 
remote.  Oil  is  now  used  for  fuel.  The  service  on  this  line  is  good 
and  rates  are  high. 

The  balance  of  the  railway  mileage  in  Panama  consists  chiefly 
of  banana  railroads  in  the  Bocas  del  Toro  region  on  the  Atlantic 
side.  A  line  of  3  feet  6  inches  gauge,  generally  known  as  the  Chiri- 
qui  line,  is  being  constructed  by  Hobard  &  Co.  for  the  Panama 
Government  and  will  run  from  David  Bay,  on  the  Pacific  side,  in  a 
northwesterly  direction,  to  Boquette.  It  will  open  up  a  consid?rable 
amount  of  coffee  country.  About  25  miles  of  this  line  are  now  prac- 
tically completed. 

In  foreign  commerce  the  balance  of  trade  is  against  Panama,  the 
value  of  imports  being  in  general  about  five  times  the  value  of  ex- 
ports. The  principal  export  is  bananas.  In  undeveloped  resources, 
timber  is  probably  of  the  greatest  value.  There  is  a  great  amount 
of  very  valuable  timber  in  the  country,  but  most  of  it  can  not  be 
taken  out  without  involving  excessive  cost  of  transportation.  It  is 


76  REPORT   ON   CENTRAL  AMERICA. 

said  that  the  soil  is  very  fertile  for  sugar  growth  and  that  an  ex- 
tensive development  will  be  possible  when  transportation  facilities 
are  improved. 

In  the  way  of  manufacturing  industries.  Panama  has  practically 
nothing.  The  best-known  is,  of  course,  the  Panama  hat  industry. 
These  hats  were  originally  made  only  in  Ecuador  and  Peru,  and  were 
called  Panama  hats  because  marketed  in  Panama.  Now  a  consider- 
able proportion  are  made  in  Panama. 

Panama  is  said  to  possess  mineral  wealth  in  gold,  silver,  copper, 
and  zinc,  but  very  few  claims  have  been  worked  on  any  commercial 
scale.     It  is  probable,  however,  that  mining  will  increase  consider 
ably  with  the  future  development  of  transportation  facilities. 

In  banking  facilities,  as  in  steamship  service,  Panama  is  much 
better  equipped  than  any  of  the  other  Central  American  Republics. 
The  principal  banks  are  as  follows:  Banco  Nacional.  Panama  Hank- 
ing Co.,  International  Banking  Corporation,  and  a  branch  of  the 
Commercial  National  Bank,  of  Washington,  D.  C. 

COSTA  RICA. 

A  distinguished  reception  committee  was  on  thv  Limon  dock  to 
receive  us.  We  were  escorted  to  the  quarters  of  the  Fruit  Company 
and  started  out  for  a  trip  over  the  wonderful  banana  plantations. 
We  spent  several  hours  viewing  the  great  development  of  the  country, 
including  the  establishment  of  hospitals,  residences,  etc.  We  were 
entertained  at  dinner  by  the  reception  committee. 

Early  the  next  morning  a  special  train  took  us  to  San  Jose.  This 
is  one  of  the  most  beautiful  journeys  in  Latin  America.  The  scenic 
beauties  of  the  country  are  wonderful.  One  passes  from  a  dense 
tropical  jungle  to  refreshing  mountain  heights.  One  week  was 
passed  in  San  Jose. 

The  total  railway  mileage  in  the  Republic  is  about  430  miles, 
including  the  70-mile  Government-owned  line  from  San  Jose  to 
Puntarenas,  the  Pacific  port.  The  principal  system  is  the  Ferro- 
carril  Costa  Rica,  which  is  owned  by  British  interests,  but  is  leased 
for  operation  to  the  Northern  Railway  of  Costa  Rica,  which  is  owned 
by  the  United  Fruit  Co.  The  Ferrocarril  Costa  Rica  connects  Port 
Limon,  the  Atlantic  port,  and  San  Jose. 

The  line  from  Port  Limon  to  San  Jose  is  one  of  the  finest  scenic 
railways  in  the  world.  After  passing  through  lowlands  near  the 
coast  it  enters  rough  mountain  country,  the  scenery  becoming  con- 
tinually more  beautiful  as  the  higher  altitudes  of  the  interior  are 
reached.  Swift-running  mountain  rivers  are  followed  most  of  the 
way,  and  at  places  there  must  be  as  much  as  1,000  feet  difference  in 
elevation  between  the  railway  and  the  river  below.  In  general  the 


REPORT  ON   CENTRAL  AMERICA.  77 

line  is  not  well  located.  There  are  many  tortuous  curves  and  grades 
as  high  as  4  per  cent.  The  gauge  is  3  feet  6  inches,  the  rails  generally 
of  60-pound  weight,  arid  a  considerable  portion  of  the  ties  are  of 
steel,  in  order  to  keep  the  gauge  on  sharp  curves.  Most  all  of  the 
bridges  are  of  steel.  The  operation  of  this  line  must  be  very  costly, 
due  to  the  profile  and  alignment  and  to  high  maintenance  costs 
brought  about  by  trouble  with  slides  on  mountain  sides  and  washouts 
of  bridges.  Furthermore,  coal  from  England,  costing  about  $12  per 
ton.  is  used  as  fuel,  but  it  is  said  that  all  the  equipment  will  soon  be 
changed  for  oil  burning,  a  change  which,  it  seems,  should  have 
Uen  made  some  time  ago.  Some  of  the  equipment  is  of  American 
manufacture  and  the  balance  English. 

The  road  is  capitalized  at  a  high  figure  and  freight  and  passenger 
lates  are  complained  of  by  the  Costa  Ricans.  Passenger  rates  are 
ii bout  4  cents  per  mile  and  freight  rates  average  about  15  cents  per 
ton-mile.  The  line  could  probably  not  be  replaced  for  less  than 
$75,000  per  mile. 

The  railway  from  San  Jose  to  the  Pacific  is  owned  by  the  Govern- 
ment and  is  about  70  miles  in  length.  This  line  likewise  runs  through 
rough  mountain  country,  but  the  territory  served  is  in  general  more 
arid  and  not  so  productive  of  local  traffic  as  that  to  the  Atlantic  side. 
The  Government  line  is  also  of  3-foot  6-inch  gauge  and  is  built  of 
about  60-pound  steel  with  wood  ties,  there  being  less  curvature  than 
on  the  line  to  the  Atlantic.  Most  of  the  equipment  is  of  American 
manufacture.  Wood  and  coal  are  used  as  fuel.  There  is  no  deep- 
water  wharf  at  Puntarenas,  and  the  lighterage  charges  to  and  from 
ships  are  high.  This,  together  with  poor  steamship  service  on  the 
Pacific,  as  compared  with  the  Atlantic  side,  places  the  Government 
line  at  a  disadvantage  in  competing  with  the  United  Fruit  line  to 
the  Atlantic. 

The  lines  now  in  operation,  similarly  to  most  railways  in  tropical 
countries,  suffer  from  the  lack  of  large  volumes  of  low-grade  traffic 
such  as  those  which  form  the  backbone  of  revenue  of  American  rail- 
ways. Costs  of  construction  and  operation  are  high,  due  to  the 
mountainous  nature  of  the  country  and  to  heavy  rainfalls.  For 
further  development  of  the  interior  to  the  north  and  south  of  the 
two  systems,  which  together  form  a  transcontinental  railway,  the 
improvement  and  extension  of  highways  appears  to  be  the  logical 
method. 

The  two  chief  products  of  Costa  Rica  are  bananas  and  coffee.  The 
cultivation  of  bananas,  which  reached  a  tremendous  output  some  years 
ago,  has  somewhat  diminished  of  late  on  account  of  the  banana 
disease,  but  still  large  quantities  are  being  shipped.  Costa  Rica 
coffee  has  been  famous  for  years  in  Europe,  where  it  obtains  a  high 


78  REPORT  OK   CENTRAL  AMERICA. 

price  because  of  its  exceptional  quality  and  flavor.     Some  of  this 
coffee  is  now  being  shipped  to  the  United  States. 

The  articles  imported  are  principally  cotton  fabrics,  machinery, 
flour,  lumber,  lard,  coal,  rice,  and  canned  and  preserved  foods,  and 
live  animals  on  foot  from  Nicaragua, 

There  are  known  to  be  considerable  mineral  deposits  in  Costa  Rica, 
but.  :here  is  b*ut  little  mining,  except  for  gold.  The  export  of 

gold  has  been  quite  large, 

At  Port  Limon  the  terminal  facilities  are  excellent.  There  are  two 
wharves  with  accommodations  for  six  large  and  two  small  steamers, 
and  so  equipped  with  track  facilities  that  loading  and  unloading  can 
be  carried  on  directly  from  the  car  to  the  vessel. 

Of  course,  Costa  Rica  has  suffered  like  the  whole  world  on  ac- 
count of  the  European  war.  The  people  are  fairly  prosperous, 
though  the  Government  is  hard  pressed  on  account  of  the  falling  off 
of  customs  duties.  Costa  Rica  has  ample  banking  houses,  but  these 
need  additional  capital.  The  International  Bank  of  Costa  Rica, 
established  at  the  suggestion  of  the  President,  Don  Alfredo  Gon- 
zales  Flores,  some  months  ago,  has  helped  considerably  in  weathering 
conditions. 

The  establishment  of  a  bank  destined  to  facilitate  loans  on  mort- 
gages at  a  fair  rate  of  interest  would  be  a  blessing  to  the  agricultural 
interests  of  the  country.  The  "  Cedula  "  law  of  Costa  Rica  should 
work  toward  making  such  a  bank  merit  investigation  of  American 
bankers,  particularly  as  the  registry  of  property  and  the  adminis- 
tration of  justice  in  Costa  Rica  are  most  reliable. 

The  commission  ascertained  that  the  present  parcel-post  rr 
between  the  United  States  and  Costa  Rica  is  inadequate,  and  preju- 
dicial to  commerce,  A  new  treaty,  along  the  lines  of  the  German- 
Costa  Rica  convention,  is  now  needed.  The  treaty  should  increase 
the  weight  and  size  of  the  package.  The  collection  of  extra  charges 
at  destination  should  be  prohibited  and  the  country  of  destination 
should  have  its  parcel  charge  prepaid.  Ample  provision  should  be 
made  for  transportation  of  parcels  in  baskets  instead  of  sacks.  The 
American  consul,  Samuel  T.  Lee,  of  San  Jose,  Costa  Rica,  has  been 
very  active  in  this  matter,  and  believes  that  the  adoption  of  these 
suggestions  would  be  most  advantageous  for  the  trade  between  the 
:ed  States  and  Costa  Rica, 

The  currency  is  on  a  gold  basis,  the  monetary  unit  being  the  colon, 
worth  about  46  cents  United  States  gold.  The  principal  banks  are 
the  Banco  Internacional.  Banco  de  Costa  Rica,  Banco  Anglo-Costa- 
rricense,  the  Royal  Bank  of  Canada,  and  Banco  Comercial.  The 
Banco  Internacional  is  an  emergency  bank,  which  was  founded  by 
the  Government  to  meet  the  extraordin.-i  '  conditions 


REPORT  ON   CENTRAL  AMERICA,  79 

brought  about  by  the  European  war.  It  will  be  liquidated  soon 
after  the  war  is  over  and  conditions  are  again  normal.  It  is  a  bank 
of  issue  and  has  a  capital  consisting  of  Costa  Rican  treasury  bonds. 
The  reserve  required  by  law  for  banks  of  issue  is  40  per  cent  in  gold. 
Interest  rates  on  commercial  loans  are  high,  ranging  from  10  to  12 
per  cent.  The  President  proposes  to  convert  the  Banco  Internacional 
into  a  general  mortgage  bank  and  induce  the  three  or  four  com- 
mercial banks  to  combine  and  form  one  commercial  bank,  with  the 
end  in  view  of  increasing  the  total  banking  power  in  the  country, 
decreasing  interest  rates,  and  providing  for  the  extension  of  rural 
credits.  The  Royal  Bank  of  Canada,  realizing  the  possibilities  of 
profit  from  the  financing  of  coffee  crops,  and  other  commercial  bank- 
ing operations,  has  recently  established  a  branch  in  San  Jose. 

NICARAGUA. 

Nicaragua  is  the  largest  of  the  Central  American  Republics  and 
the  most  thinly  populated,  its  area  being  49.200  square  miles  and 
population  about  550,000.  The  greater  part  of  the  population  is  on 
the  Pacific  side,  where  the  land  is  in  general  higher  and  the  climate 
more  agreeable  than  on  the  Atlantic  slope.  The  capital  city  is 
Managua,  located  near  Lake  Managua,  on  the  Pacific  slope,  and  hav- 
ing a  population  of  about  30.000. 

On  the  Atlantic  coast,  the  country  is  in  general  low  and  there 
are  many  swamps;  a  considerable  area  is  covered  with  dense  tropical 
growth!  including  hardwood  trees,  Oa  the  Pacific  side  are  two 
large  fresh  water  lakes — Lake  Managua,  about  16  by  32  miles,  and 
Lake  Nicaragua,  about  34  by  92  miles.  These  lakes  temper  the  cli- 
mate noticeably  and  both  are  used  for  transportation.  The  San 
Juan  River  connects  Lake  Nicaragua  with  the  Atlantic  Ocean  and 
forms  a  part  of  the  proposed  route  of  the  Nicaraguan  Canal. 

The  only  railway  of  importance  in  the  Republic  is  the  Ferro- 
carril  del  Pacifico  de  Nicaragua,  a  system  of  3  feet  6  inch  gauge  and 
about  171  miles  of  track  with  Pacific  terminus  at  Corinto  and  inland 
terminus  at  Granada,  on  Lake  Nicaragua.  There  are  branch  lines 
to  El  Viego  and  Diriamba.  This  property  was  originallv  built  by 
the  Nicaraguan  Government  but  is  now  owned  by  a  corporation  of 
the  above  name.  The  Government  owns  49  per  cent  of  the  stock  and 
the  balance  is  owned  by  foreign  interests. 

In  contrast  with  the  Costa  Rican  railways,  this  line  runs  through 
relatively  level  country  and  does  not  include  much  heavy  construc- 
tion. No  great  amount  of  elevation  is  overcome,  grades  are  in  places 
somewhat  heavy  over  short  distances,  but  this  is  due  to  poor  location 
rather  than  to  the  topography  of  the  country  traversed.  Managua 
and  Granada  are  only  about  100  feet  above  the  s^a  level.  A 


80  REPORT   ON    CENTRAL   AMERICA. 

s  icier  able  portion  of  the  track  is  tangent  and  the  speeds  of  opera 
tion  are  high  as  colnpared  with  other  lines  in  Central  America. 

It  is  entirely  fair  to  say  that  the  American  management  of  this 
railway  has  done  work  of  great  sociological  value.  The  native  em- 
ployees have  been  taught  railroading  along  the  lines  of  best  Ameri- 
can practice.  This  education,  together  with  the  work  of  the  hos- 
pital department  toward  improved  health  of  the  employees,  has 
surely  accomplished  something  in  the  way  of  developing  good  citi- 
zens. 

One  of  the  greatest  needs  of  the  country  is  further  railway  de- 
velopment, particularly  a  connection  of  the  present  system  with  the 
Atlantic  coast.  The  Atlantic  seaboard  is  the  most  advantageous 
route  for  importing  and  exporting ;  and,  as  stated  before,  the  greater 
part  of  the  Nicaraguan  population  is  on  the  Pacific  side.  A  rail- 
road to  the  Atlantic  would  undoubtedly  be  a  great  help  toward 
cementing  more  closely  together  the  peoples  of  the  various  sections 
of  the  country  and  thereby  lessening  the  likelihood  of  revolutionary 
disturbances. 

An  Atlantic  extension  of  the  Nicaraguan  system  would  involve 
less  initial  cost  and  could  be  operated  more  cheaply  than  the  trans- 
continentals  in  Costa  Rica  and  Guatemala.  Whether  or  not  it  would 
be  profitable  can  not  very  well  be  said  without  making  a  study  of  the 
interior  country  through  which  it  would  run.  It  appears  doubtful, 
however,  that  earnings  would  cover  interest  on  first  cost  for  at 
least  two  or  three  years  after  commencement  of  operation,  because 
the  interior  sections  of  Nicaragua  are  sparsely  populated  and  largely 
undeveloped.  The  earnings  of  the  new  line  would  also  be  in  a  meas- 
ure at  the  expense  of  the  present  system.  The  Nicaraguan  trans- 
continental, if  built,  would  probably  have  more  possibilities  for  the 
ultimate  development  of  local  traffic  en  route  than  those  across  Costa 
Rica  and  Guatemala. 

The  political  geography  of  Nicaragua  is  interesting.  Granada 
and  Leon  are  rival  cities,  the  former  being  the  seat  of  the  Conserva- 
tive Party  and  the  later  of  the  Liberals.  Managua,  the  capital,  is 
about  halfway  between  the  two,  the  location  having  been  chosen 
as  a  compromise.  Leon  is  the  largest  city  in  the  republic  in  both 
population  and  business. 

The  only  bank  of  issue  in  Nicaragua  is  the  National  Bank  of 
Nicaragua. 

A  criticism  frequently  advanced  is  the  high  value  of  the  mone- 
tary unit  (the  cordoba),  which  is  equivalent  to  our  dollar.  The 
laboring  classes  are  accustomed  to  being  paid  with  depreciated 
paper  currency  and  there  has  been  some  difficulty  in  convincing  them 
that  the  cordoba  is  worth  so  many  times  more  than  the  old  peso. 
Some  employers  contend  this  has  forced  them  to  raise  wages. 


REPORT  ON   CENTRAL  AMERICA.  81 

In  addition  to  the  Banco  Nacional,  there  are  the  Anglo-American 
Bank  and  the  Commercial  Bank  of  Spanish  America,  Ltd.,  which 
do  a  general  commercial  banking  business. 

The  greatest  resources  of  Nicaragua  are  agricultural,  principally 
coffee  and  sugar.  There  is  said  to  be  a  considerable  amount  of  min- 
eral wealth  in  Nicaragua,  mostly  on  the  Atlantic  side,  but  there  has 
been  no  geological  survey  of  the  country  to  determine  just  what  the 
mineral  wealth  deposits  amount  to.  Like  the  other  Central  American 
republics,  Nicaragua  possesses  timber  wealth,  but  as  yet  development 
has  not  been  on  any  large  scale,  due  presumably  to  lack  of  trans- 
portation facilities. 

In  the  departments  of  Chinandega  and  Leon  the  soil  is  very  fertile 
for  the  cultivation  of -sugar.  Not  far  from  the  town  of  Chinandega 
is  the  property  of  the  Nicaragua  Sugar  Estates,  Ltd.,  a  British 
concern,  which  has  undertaken  sugar  cultivation  in  Nicaragua  on  an 
extensive  scale.  The  property  covers  9,000  acres  and  800  men  are 
employed.  The  output  last  year  was  6,000,000  pounds  of  sugar  and 
it  is  expected  that  this  year's  will  total  10,000,000  pounds.  It  is  said 
that  the  company  earns  30  per  cent  net  on  its  investment. 

The  country  is  now  recovering  from  a  long  period  of  economic 
disturbance  brought  about  principally  by  political  unrest.  Com- 
paring present  conditions  in  Nicaragua  with  those  which  obtained 
several  years  ago,  the  progress  of  the  Republic  has  certainly  been 
rapid. 

HONDURAS. 

Honduras  is  the  country  of  Central  America  which  has  perhaps 
attracted  more  attention  than  any  of  the  others  on  account  of  the 
great  development  that  has  been  going  on  for  some  time  on  the 
north  coast.  For  the  most  part  Honduras  is  mountainous  and 
heavily  forested,  but  there  are  plantations  on  the  uplands  splendid 
for  cattle  grazing.  On  the  north  coast  in  general  the  lands  are  low 
and  it  is  here  where  the  great  banana  industry  flourishes  at  its  best. 
Outside  of  the  railways  operated  by  the  various  banana  companies 
on  the  coast  and  the  National  Railroad  running  from  Puerto  Cortez 
to  Pimienta,  there  is  little  or  no  railroad  communication  between 
important  points.  The  United  Fruit  Co.,  the  Vaccaro  Bros;,  and 
the  Cuyamel  Fruit  Co.  maintain  steamship  lines  between  the  various 
Atlantic  ports  and  American  ports.  Amapala,  the  island  port  of  the 
Pacific,  suffers  for  want  of  communication,  as  do  all  the  other  ports 
on  the  west  coast. 

The  railroad  development  on  the  Atlantic  coast  has  been  very 
great.  The  Tela  Railroad  Co.  has  built  over  one  hundred  miles 
of  railroad  and  erected  a  thriving  port  at  Tela,  with  a  wharf  where 
large  ships  can  dock  and  a  magnificent  hospital  for  the  care  of  its 

1063—18 6 


82  REPORT  ON    CENTRAL   AMERICA. 

employees.  The  Truxillo  Railroad  Co.  has  already  built  about 
25  miles  of  line,  opening  up  one  of  the  richest  agricultural 
sections  of  the  country,  and  contemplates  extending  its  line  to  Juti- 
galpa.  The  port  of  Truxillo,  one  of  the  oldest  and  best  in  the 
Republic,  is  destined  to  be  in  the  near  future  one  of  great  im- 
portance. 

The  Republic  is  even  more  lacking  than  Nicaragua  in  railway 
mileage  and  will  undoubtedly  continue  to  be  so  for  some  time  to 
come,  because  of  the  tremendous  costs  of  railway  construction  and 
the  lack  of  traffic.  There  are  about  150  miles  of  railway  in  the 
country,  all  of  which  is  in  the  northern  part  and  tributary  to  the 
Atlantic.  The  National  Railway,  owned  by  the  Government,  is  65 
miles  in  length  and  runs  inland  from  Puerto  Cortex,  on  the  Atlantic 
coast. 

In  discussing  the  subject  of  transportation  routes  in  Honduras, 
mention  must  be  made  of  the  Carretera  del  Sur,  the  great  national 
highway  from  San  Lorenzo  to  Tegucigalpa.  It  was  commenced 
about  15  years  ago  and  its  construction  was  a  stupendous  task  to 
say  the  least.  The  country  traversed  is  extremely  mountainous. 
The  road  is  splendidly  built — its  maximum  grade  is  said  to  be  9 
per  cent.  It  seems  unfortunate  in  a  way  that  the  road  was  built 
to  the  Pacific  side  instead  of  to  the  Atlantic1,  because  the  Atlantic 
slope  is  decidedly  the  most  fertile  and  the  Atlantic  seaboard  is  the 
most  advantageous  commercially.  Of  course,  the  distance  to  the 
Atlantic  coast  from  the  capital  city  is  greater  than  to  the  Pacific. 
Shipments  over  the  Carretera  del  Sur  to  or  from  the  Pacific  are 
burdened  heavily  by  the  cost  of  lighterage  from  San  Lorenzo  to 
Amapala,  a  distance  of  30  miles  through  "  esteros "  from  the  end 
of  the  road  to  the  Pacific  port.  It  is  planned  to  extend  the  "  carra- 
tera  "  to  a  point  on  the  mainland  opposite  Amapala  and  it  is  pos- 
sible that  the  extension  will  be  carried  further  so  as  to  reach  Zacate 
Island.  This  work,  if  carried  out,  will  decrease  the  cost  of  lighter- 
age very  greatly. 

Transportation  in  the  interior  is  chiefly  by  mule  back  or  oxcart. 
It  is  safe  to  say  that  over  half  the  population  of  the  country  is  de- 
pendent on  mule-back  transportation. 

A  privately  owned  automobile  service  is  furnished  for  passengers 
between  Lorenzo  and  Tegucigalpa,  the  fare  being  $12.  For  this 
service  the  Government  pays  a  subvention  of  $600  per  month.  The 
greatest  development  of  the  national  resources  of  Honduras  has 
been  mining  and  in  the  production  of  certain  agricultural  products, 
principally  bananas,  coconuts,  and  coffee.  The  New  York  &  Hon- 
duras Rosario  Mining  Co.,  the  Socorro  Gold  &  Silver  Mine,  the 
El  Transito,  and  the  Sabana  Grande  Honduras  Mining  Co.  are  the 
principal  companies  doing  business  there. 


KEPOKT  ON   CENTRAL   AMERICA.  83 

The  three  principal  banks  in  Honduras  are  the  Banco  de  Honduras, 
Banco  Atlantida,  and  the  Banco  de  Comercio.  The  two  first  named 
are  banks  of  issue.  The  law  requires  a  40  per  cent  silver  reserve. 
Rates  of  exchange  are  largely  influenced  by  the  operations  of  the 
New  York  &  Honduras  Eosario  Mining  Co.  and  the  United  Fruit  Co. 

The  Honduran  Government's  debt  was  mostly  incurred  about  40 
years  ago  in  connection  with  a  Government  bond  issue  sold  to  Europe 
for  the  construction  of  the  Puerto  Cortez-Pimienta  Railroad.  There 
is  considerable  difference  of  opinion  in  regard  to  the  validity  and 
amount  of  the  debt;  various  figures  from  forty  to  one  hundred 
million  dollars  are  mentioned. 

Honduras  is  reported  to  be  rich  in  mining  resources,  largely  un- 
developed. Gold  and  silver  are  the  principal  ores  mined.  However, 
not  very  many  properties  are  being  worked.  The  largest  property 
under  operation  is  owned  by  the  New  York  &  Honduras  Ersario  Min- 
ing Co.,  and  is  located  near  San  Jacinto,  about  30  miles  from  Teguci- 
galpa. This  company  is  capitalized  at  about  $2,000,000  arid  pays  12 
per  cent  dividends.  The  ore  yields  about  $10  silver  per  ton.  The 
company's  plant  is  modern  in  every  respect.  These  mines  have  been 
worked  by  American  capital  for  about  30  years,  and  it  is  said  that 
they  are  not  far  from  exhaustion.  The  company  has  plans  under 
way  to  open  up  new  fields  in  another  section. 

The  future  development  of  mining  in  Honduras  will  probably  be 
with  large  scale  operations  on  relatively  low-grade  ores,  and  will 
be  somewhat  dependent  upon  the  development  of  transportation 
facilities. 

In  agriculture  the  greatest  development  has  been  in  the  production 
of  bananas  on  the  lowlands  near  the  Atlantic.  Hardwood  timber 
resources  on  the  Atlantic  slope,  although  valuable,  have  not  been 
worked  to  any  extent  on  account  of  lack  of  transportation. 

KL   SALVADOR. 

Salvador  is  the  smallest  of  the  Central  American  Republics  and 
the  most  densely  populated.  With  an  area  of  7,325  square  miles  and 
a  population  of  about  1,600,000,  it  ranks  third  among  the  countries 
of  the  world  in  density  of  population. 

This  Republic  is  the  only  one  of  the  group  which  does  not  front 
on  the  two  oceans,  its  only  coast  being  the  Pacific.  This  feature  is, 
of  course,  to  its  commercial  disadvantage.  Its  trade  relations  with 
the  United  States  are  mainly  through  San  Francisco.  The  three 
principal  routes  to  Salvador  from  the  Atlantic  are  as  follows :  First, 
via  Puerto  Barrios  and  the  International  Railway  to  Zacapa,  Guate- 
mala, and  by  mule  back  or  carts  for  more  than  a  hundred  miles  to 
San  Salvador;  second,  via  Puerto  Barrios  across  Guatemala  by  rail 


84  REPORT   ON    CENTRAL  AMERICA. 

to  San  Jose,  Guatemala,  and  by  ship  to  any  one  of  the  three  Pacific 
ports  of  Salvador;  and  third,  via  the  Isthmus  of  Panama  and  north 
by  ship  on  the  Pacific  to  Salvador. 

The  general  topography  of  the  country  is  volcanic  in  nature  and 
not  unlike  that  of  the  Pacific  side  of  Nicaragua.  Central  American 
earthquakes  are  said  to  often  center  in  Salvador. 

The  resources  of  the  country  are  principally  agricultural,  coffee 
being  of  the  greatest  importance  by  far.  The  country  seems  to  be 
remarkably  well  adapted  to  the  growth  of  good  coffee,  and  the 
density  of  the  population  has  brought  about  a  very  intensive  culti- 
vation, with  the  utilization,  in  many  instances,  of  very  rough  moun- 
tain sides  for  planting. 

Unlike  the  other  Central  American  Republics,  Salvador  produces 
no  bananas  on  a  commercial  scale;  the  growth  of  bananas  in  the 
other  Republics  is  limited  almost  entirely  to  the  Atlantic  lowlands. 
There  are  quite  a  few  sugar  plantations  in  Salvador,  but  the  industry 
is  of  no  great  importance  and  not  a  great  amount  is  exported. 
Tobacco  is  raised,  but  is  of  an  inferior  grade  and  is  only  exported 
to  the  other  Central  American  countries. 

The  "  balsam  of  Peru  "  industry  is  worthy  of  mention,  particularly 
because  it  is  the  one  by  which  Salvador  is  best  known.  The  sap, 
which  is  used  for  medicinal  purposes,  comes  from  the  inner  bark  of 
the  balsam  tree.  Scientists  say  that  the  balsam  tree  is  native  in  no 
country  but  the  west  coast  of  Central  America,  inferring  that  "bal- 
sam of  Peru  "  is  somewhat  a  misnomer. 

Salvador  does  not  possess  timber  resources  comparable  with  those 
of  the  other  Central  American  countries.  This  is  to  some  extent 
due  to  its  being  entirely  on  the  Pacific  slope  and  also  to  the  necessity 
of  clearing  the  land  for  agricultural  purposes. 

The  principal  railway  is  owned  by  the  Salvador  Railroad  Co., 
Ltd.,  an  English  concern,  and  runs  from  Acajutla,  on  the  Pacific 
coast,  to  San  Salvador,  the  capital  city.  The  gauge  is  3  feet  6  inches 
and  wood  is  used  for  fuel.  The  Salvador  Government  pays  this 
company  a  subvention  of  25,000  pounds  sterling  per  annum,  but  this 
arrangement  expired  in  December,  1916.  This  line,  like  the  Nica- 
raguan  Railroad,  is  very  dusty.  The  stations  and  equipment  are  in 
good  condition.  This  railroad  has  a  practical  monopoly  of  rail 
traffic  in  and  out  of  the  country. 

A  rail  line  from  San  Salvador  to  the  port  of  La  Libertad  has  been 
projected,  but  as  yet  it  has  not  been  finished.  A  part  is  already  built 
and  owned  by  local  capital,  and  the  failure  of  the  plan  of  extension 
is  attributed  by  some  to  the  attitude  of  those  in  control  of  the  part 
already  built.  This  line,  if  built  to  La  Libertad,  would  be  over  the 
most  direct  route  from  the  capital  city  to  the  coast  and  would 
traverse  a  densely  populated  section. 


EEPOKT  ON   CENTRAL  AMERICA,  85 

The  San  Salvador-La  Uni6n  line  is  being  built  by  the  Inter- 
national Railways  of  Central  America,  and  there  remains  a  gap  of 
only  about  60  miles  not  yet  constructed.  It  is  planned  that  this  line 
be  ultimately  extended  northward  to  connect  with  the  Guatemala 
lines  and  thus  form  a  part  of  the  Pan  American  Railway.  La  Union 
is  on  the  Gulf  of  Fonseca  and  has  a  deep  water  wharf  and  a  good 
natural  harbor. 

For  internal  transportation,  Salvador,  like  the  other  countries 
visited,  is  in  great  need  of  more  and  better  wagon  roads. 

The  principal  banks  are  the  Banco  Nacional  de  El  Salvador,  the 
Banco  Agricola  Comercial,  and  the  Banco  Occidental.  Each  of  these 
issues  bank  notes;  the  silver  reserves  required  are  50  per  cent  by  the 
Banco  Nacional  and  40  per  cent  by  each  of  the  other  two. 

The  Government  proposes  to  put  in  effect  an  income  tax  system 
which  will  make  up  some  of  the  loss  in  revenue  which  it  has  suffered 
as  a  result  of  the  war  in  Europe.  It  is  to  be  expected  that  there  will 
be  considerable  difficulty  in  establishing  such  a  system  on  a  very 
remunerative  scale  because  the  burden  will  fall  upon  a  relatively  few 
who  are  politically  influential. 

Nearly  all  the  cultivable  lands  of  the  Republic  have  been  developed 
and  land  values  are  high.  The  greater  part  of  the  rich  lands  are 
owned  by  a  relatively  small  number  of  men,  mostly  Salvadorians. 

In  its  educational  system  Salvador  is  second  only  to  Costa  Rica. 
Education  is  free  and  compulsory.  There  is  a  national  university, 
with  colleges  of  medicine,  law,  and  engineering. 

Salvador  is  a  small  country,  crowded  with  population,  and  with- 
out any  great  possibilities  of  development.  In  order  to  realize  its 
national  ambitions  it,  like  the  other  Republics,  must,  in  some  way, 
change  its  methods  of  raising  funds  for  the  Government. 

GUATEMALA. 

Except  for  small  areas  along  the  Atlantic  and  Pacific  coasts,  and 
other  small  areas  in  the  extreme  north,  Guatemala  lies  high,  with 
altitudes  of  from  4,000  to  about  11,000  feet.  The  country  is  very 
much  broken  by  mountain  ranges,  with  numerous  plateaus  and  high 
valleys.  The  climate  is  not  oppressive  and  is  quite  healthy.  The 
soil  is  fertile  and  the  rainfall  is  good.  The  bulk  of  the  popula- 
tion is  located  in  the  half  of  the  Republic  toward  the  Pacific.  There 
is  but  little  settlement  on  the  north  and  a  scanty  settlement  on  the 
Atlantic  side. 

Although  the  mountains  of  Guatemala  are  known  to  be  rich  in 
minerals,  there  has,  as  yet,  been  very  little  development  in  the  mining 
industry  of  the  country. 

Guatemala  is  preeminently  an  agricultural  country,  particularly  a 
coffee-growing  country,  the  exports  of  this  product  accounting  for 


86  REPORT  ON   CENTRAL  AMERICA. 

about  80  per  cent  of  the  total  exports.  Guatemala  coffee,  like  that  of 
other  Central  American  countries,  has  a  high  reputation,  particularly 
in  Europe,  where  it  brings,  as  a  rule,  the  highest  prices.  Besides 
coffee  there  has  been  a  considerable  development  in  bananas  and 
sugar. 

The  agricultural  resources  of  Guatemala  are  very  great  and  have 
been  little  more  than  scratched  by  development,  and  the  methods  used 
have  for  the  most  part  been  primitive. 

The  coffee-growing  business  is  nearly  entirely  in  the  hands  of  Ger- 
mans and  is  the  most  striking  instance  in  Central  America  of  the 
practical  domination  of  one  field  of  business  activity  by  foreigners  of 
a  single  nationality.  Germans  own  plantations  producing  about  a 
third  of  the  tut  a  I  crop  as  compared  with  the  domestic-owned  total, 
producing  about  one-half.  A  very  large  proportion  of  the  properties 
owned  by  other  than  German  nationalities  are  mortgaged  to  German 
firms. 

The  banana  industry  on  the  Atlantic  seaboard  is  of  great  im- 
portance and  is  almost  entirely  in  the  hands  of  the  United  Fruit  Co. 
As  yet  there  has  been  no  trouble  from  the  banana  disease  in  Gua- 
temala. 

The  sugar-growing  industry  is  of  some  importance  locally,  but  no 
great  amount  is  exported.  The  machinery  used  is  chiefly  of  English 
and  German  manufacture. 

There  is  said  to  be  a  great  amount  of  mineral  wealth  in  Guatemala, 
but  as  yet  there  has  riot  been  much  development.  There  is  a  great 
amount  of  first-class  grazing  land  for  cattle,  but  only  the  hides  are 
exported.  The  country  is  rich  in  timber  resources,  but  development 
has  been  very  slow  on  account  of  transportation  difficulties. 

There  is  probably  more  manufacturing  in  Guatemala  than  in  any 
of  the  other  countries  of  Central  America.  Shoes,  hats,  furniture, 
and  iron  work  are  those  worthy  of  mention.  In  Guatemala  City 
a  fruit-canning  plant  has  recently  commenced  operation,  and  it  is 
planned  that  several  choice  Guatemalan  fruits  be  in  this  way  ex- 
ported to  foreign  countries. 

The  total  railway  mileage  is  about  500  miles,  mostly  owned  by  the 
International  Railways  of  Central  America.  This  system  includes 
a  transcontinental  line  from  San  Jose,  on  the  Pacific,  to  Puerto 
Barrios,  on  the  Atlantic,  which  is  the  best  built  of  any  of  the  Central 
American  lines,  except  the  Panama  Railroad.  It  is  mostly  of  very 
costly  mountain  construction.  The  gauge  is  3  feet  6  inches,  and  oil  is 
used  for  fuel.  Grades  are  in  general  very  steep.  The  line  was  origi- 
nally built  by  a  Southern  Pacific  group  headed  by  Mr.  Huntington. 

Transportation  in  the  interior  is  mostly  by  mule  back,  ox  cart,  and 
on  the  backs  of  Indian  "  cargadores."  The  costs  are,  of  course,  high. 


' 

REPORT   ON    CENTRAL   AMERICA.  87 

The  principal  hunks  are  the  Banco  de  Guatemala,  Banco  Inter- 
nacional,  and  Banco  Occidental.  The  monetary  unit  is  the  peso,  and 
the  circulation  consists  practically  entirely  of  bank  notes.  There  is 
no  metal  reserve  worth  mentioning,  the  security  behind  the  bank 
notes  being  the  indebtedness  of  the  Government  to  the  banks.  Con- 
sequently, there  is  no  stabilized  rate  of  exchange. 

Guatemala  has  great  resources  and  is  destined  for  vast  develop- 
ment. 

CENTRAL  AMERICA  AS  A  WHOLE. 

Each  of  the  Central  American  Republics  possesses  a  distinctive 
character  of  its  own.  although  they  are,  in  many  respects,  similar 
and  are  struggling  with  certain  problems  common  to  all.  Each  Re- 
public has  a  national  spirit  and  there  is  considerable  rivalry  be- 
tween them. 

The  Spanish  language  is,  of  course,  universally  used  throughout 
Central  America,  and  Spanish  business  methods  are  still  in  vogue. 
As  regards  climate,  the  several  countries  are  similar  in  that  there 
are  wide  variations  depending  mainly  on  altitude.  Each  country, 
except  Salvador,  is  rich  in  undeveloped  resources  and  will  remain  so, 
in  great  measure,  until  means  of  transportation  are  improved  and 
extended. 

Before  the  outbreak  of  the  Piuropean  war  the  total  value  of  annual 
exports  from  the  Central  American  Republics  was  about  $44,000,000, 
of  which  about  $21,000,000  was  sold  to  the  United  Kingdom,  Ger- 
many, and  France,  and  about  $18,000,000  to  the  United  States.  The 
corresponding  figures  of  annual  imports  are,  approximately, 
$46,000,000  total;  $17,900,000  from  the  United  Kingdom,  Germany, 
and  France,  and  $25,000,000  from  the  United  States.  From  these 
figures,  it  will  be  noted  that  Central  America  has  been  doing  quite 
a  business  with  Europe.  The  United  States,  however,  has  sold  more 
to  Central  America  than  Europe  has,  although  buying  less  than 
Europe. 

After  the  outbreak  of  the  war,  there  was  a  shortage  of  bottoms, 
ocean  freight  rates  went  up,  and  the  Central  Americans  found  their 
European  trade  almost  entirely  shut  off  with  a  consequent  reduction 
in  Government  revenues  derived  from  imports.  In  an  attempt  to 
make  up  these  decreases,  the  Governments  are  struggling  with  the 
tremendous  problem  of  instituting  some  system  of  direct  taxation. 

In  each  Republic,  the  railroad  is  the  subject  of  bitter  attack. 
Most  of  the  lines  are  owned  by  foreign  capital  and  in  general  there 
is  but  one  important  railroad  in  each  country.  Some  of  the  com- 
plainers  are  prone  to  compare  rates  with  those  on  American  railways 
and  at  the  same  time  refuse  to  consider  the  great  differences  in  oper- 
ating conditions,  length  of  haul,  and  volume  of  traffic,  which  entirely 
invalidate  the  comparisons. 


88  REPORT  ON   CENTRAL  AMERICA. 

It  is  true  that  rail  rates  are  in  general  pretty  high  in  Central 
America,  but  they  are  necessarily  so  because  traffic  volumes  are  small. 
None  of  the  lines  carries  any  large  amount  of  low-grade  commodities 
such  as  those  which  bring  American  railways  a  considerable  portion 
of  their  revenues  and  which  can  be  moved  in  heavy  trainloads  at 
low  unit  operating  costs.  Moreover  on  some  of  the  lines,  particularly 
those  in  Costa  Rica  and  Guatemala,  the  costs  of  initial  construction 
and  of  operation  are  high.  These  conditions  are  bound  seriously  to 
restrict  railway  development  in  Central  America.  Furthermore, 
transportation  by  oxcart  and  mule  back  is  cheap  and  often  wins  out 
in  competition  with  parallel  rail  lines  when  speed  is  not  essential. 
In  the  development  of  the  interior,  these  more  primitive  methods  will 
be  discouraging  competitors  to  the  ambitious  railroad  builder. 

Even  more  important  to  Central  America  than  the  extension  of 
railways  is  the  provision  of  steamship  facilities,  particularly  on  the 
Pacific  side.  The  Pacific  Mail  and  W.  E.  Grace  &  Co.  operate  the 
only  lines  worth  mentioning  on  the  Pacific  side ;  the  service  is  in- 
frequent and  irregular.  At  Acajutla,  Salvador,  we  saw  60,000  bags 
of  coffee  which  we  were  told  had  been  there  some  time  awaiting  ship 
space.  The  costs  of  shipment  via  the  Pacific  are  very  considerably 
increased  by  the  general  lack  of  deep-water  wharves.  On  the  At- 
lantic side,  the  service  provided  by  the  United  Fruit  Co.  is  splendid. 
Bates  are,  of  course,  high  at  present  due  to  unusual  trade  and  ship- 
ping conditions,  but  this  is  general  all  over  the  world. 

The  telegraph  systems  in  Central  America  are  owned  and  operated 
by  the  Governments.  Rates  are  surprisingly  low  and  the  service  is 
very  greatly  used,  proportionately  more  so,  it  appears,  than  in  the 
United  States. 

Interest  rates  are  high  in  Central  America,  in  general  about  10  or 
12  per  cent  for  commercial  loans  and  for  discount  of  notes.  The 
banking  power  is  not  great,  in  some  cases  perhaps  not  enough  for 
legitimate  commercial  requirements  in  moving  crops,  etc.  Many  of 
the  people  who  have  money  keep  it  in  foreign  banks,  and  there  is 
not  enough  local  capital  in  any  one  of  the  countries  to  carry  out 
permanent  improvements  of  any  extent. 

The  long-time  credit,  which  is  more  or  less  universal  in  Spanish 
America,  is  at  present  a  serious  barrier  to  the  furtherance  of  Ameri- 
can trade  with  Central  America. 

The  Central  Americans  actually  attach  more  importance  to  credit 
terms  than  to  price  quotations  in  making  purchases  from  abroad. 
The  long-time  credit  is  deep  rooted  in  Spanish- American  custom 
and  has  sprung  from,  and  is  justified  to  a  certain  extent  by.  funda- 
mental economic  conditions.  Production  is  in  the  main  agricultural 
and  is  limited  to  a  very  few  crops.  The  load  factor,  so  to  speak,  of 
money  requirements  is  therefore  very  low,  and  there  «ro  no  manu- 


REPORT  ON   CENTRAL  AMERICA.  89 

facturing  industries  to  even  it  up  by  more  or  less  continual  output 
and  employment  capacity.  The  slowness  of  transportation  also  con- 
tributes, to  a  certain  extent,  toward  justification  of  the  long  credit. 
It  is  in  general  a  long  time  before  goods  purchased  from  foreign 
countries  arrive  at  their  destination  and  their  value  can  be  realized. 

A  report  on  Central  America,  touching  upon  possibilities  of  ex- 
tension of  American  trade  and  investment  of  American  capital, 
would  be  incomplete  without  mention  of  the  great  work  of  the 
United  Fruit  Co.  They  were  the  forerunners  of  the  movement 
toward  Pan  American  trade  as  far  as  Central  America  and  the  West 
Indie%  are  concerned.  By  the  investment  of  many  millions  of  dollars 
in  Latin  America  they  have  brought  wealth  and  employment  to  the 
natives;  have  earned  a  good  return  on  the  capital  invested;  have  pro- 
vided a  magnificent  fleet  of  steamships  plying  to  and  from  the  prin- 
cipal ports  of  the  United  States  and  Europe ;  and  last,  but  not  least, 
have  changed  the  status  of  the  banana  in  the  United  States  from 
ihfit  of  an  expensive  luxury  to  that  of  a  cheap,  wholesome,  and  gen- 
erally used  food. 

There  appears  to  be  a  desire  in  Central  America  for  the  establish- 
ment of  branch  banks,  with  capital  to  loan  to  coffee  growers,  and  for 
other  commercial  purposes.  Coffee  growing  is  generally  financed 
by  the  advance-payment  plan,  net  unlike  the  method  used  in  the 
Southern  States  for  cotton  growing,  and  the  rates  of  interest  are 
very  high.  European  capital  has  engaged  in  this  field  on  a  large 
scale  and  with  profit.  Branch  banks  could  be  exceedingly  helpful 
in  obtaining  credit  information  for  the  use  of  American  manufac- 
turers and  which  is  essential  for  the  furtherance  of  our  export  busi- 
ness with  Central  America. 

For  machinery,  it  is  surprising  to  learn  of  the  wide  price  differ- 
ences in  favor  of  European  concerns  as  compared  with  those  of  the 
United  States;  so  much  so  as  to  make  one  doubt  that  American 
manufacturers  can  keep  the  greater  part  of  the  machinery  business 
after  the  war  even  if  they  get  it. 

The  English  and  Germans  have  been  very  successful  in  Central 
America  in  the  development  of  an  export  trade  in  machinery  and 
general  merchandise.  They  have  studied  the  needs  of  their  customers 
more  carefully  and  have  gone  after  the  business  more  actively  than 
we  have,  presumably  because  foreign  trade  was  to  them  more  essential 
than  to  us. 

There  is  a  great  need  for  uniformity  in  forms  of  consular  invoices, 
trade  paper  of  various  kinds,  commercial  laws,  etc.,  among  the 
several  Republics,  and,  in  fact,  throughout  Latin  America.  At  pres- 
ent each  country  differs  from  the  others  in  these  respects,  with  the 
result  that  there  is  unnecessary  routine  labor  in  dealing  with  them. 
These  unnecessary  obstacles  to  trade  are  bound  to  be  disposed  of 


90  J8EPOKT  ON   CENTKAL  AMEKICA. 

before  long.  The  committee  were  impressed  with  the  constructive 
work  which  the  chambers  of  commerce  in  the  various  Republics  are 
carrying  on  toward  developing  closer  commercial  relations  with  the 
United  States.  The  thought  was  expressed  on  many  occasions  that 
this  could  best  be  accomplished  by  more  intimate  affiliation  and 
coalition  of  the  United  States  Chamber  of  Commerce  and  its  sister 
organizations  throughout  the  country  with  those  of  Central  America. 

Experience  prompts  the  suggestion  that  a  workable  plan  toward 
that  end  be  initiated,  with  the  recommendation  that  exhibits  of 
Latin- American  products  and  industries  be  established  in  the  cham- 
bers of  commerce  of  the  United  States,  and  like  displays  made  of 
American  products  in  these  Republics. 

The  appointment  of  well-qualified  representatives  of  the  respective 
chambers  of  commerce  for  the  purpose  of  supplying  information 
relative  to  commercial  and  financial  conditions  would  be  a  logical 
and  constructive  corollary  to  the  plan  of  cooperation  suggested. 

Of  the  six  countries  of  Central  America,  Nicaragua  and  Guatemala 
offer  the  greatest  possibilities  for  development.  The  Pan  American 
movement  and  conditions  brought  about  by  the  European  war  have 
awakened  in  the  Central  American  Republics  a  new  interest  in  their 
economic  life  and  their  world-trade  position.  From  this  new  interest 
and  the  activity  which  will  spring  from  it  progress  is  almost  certain 
to  result. 

MONETARY  CON DITION  8. 

It  is  appropriate  here  to  refer  to  a  paper  recently  prepared  by 
Mr.  John  Clausen,  a  member  of  "this  commission,  in  which  he  said: 

"  In  Central  America  we  find  a  variety  of  money  standards — with 
gold,  silver,  bimetallic,  and  inconvertible  paper  circulation — nnd 
while  this  in  itself  is  a  study,  it  would  seem  a  matter  of  great  con- 
cern for  these  Republics  to  arrange  a  more  uniform  medium  of 
exchange,  recognizing  the  essential  advantages  of  a  metallic  system 
as  against  fiat  and  inconvertible  paper  issues." 

In  line  with  the  matters  under  consideration  it  may  here  prove  of 
interest  to  present  a  resume  of  conditions  and  requirements  of  the 
six  Republics  comprising  Central  America : 

Panama. — The  monetary  system  of  Panama  is  based  on  a  theoretical 
gold  standard,  with  the  balboa  as  the  unit  and  a  circulation  of  silver 
half  balboas  and  fractional  coins. 

Unlike  other  Central  American  Republics,  it  has  $6.000,000- -part 
of  the  $10,000,000  paid  them  by  the  United  States  Government  for 
the  Panama  Canal  rights — invested  in  New  York  City  real  estate 
first  mortgages,  from  which  a  yearly  revenue  of  some  $250,000  is 
derived.  The  United  States  holds  the  larger  part  of  their  foreign 


REPORT  ON    CENTRAL   AMERICA.  91 

trade,  which  could  be  materially  increased  by  the  improvement  of 
shipping  facilities. 

Costa  Rica. — The  standard  monetary  unit  of  Costa  Rica  is  the 
gold  colon,  with  a  circulation  of  bank  notes  based  upon  gold — 4-0 
per  cent — and  other  assets  of  the  issuing  banks.  Foreign  gold  coins 
circulate  freely  and,  at  fixed  rates,  are  accepted  as  legal  tender  in 
the  Eepublic. 

The  foreign  debt  amounts  to  approximately  $17,000,000,  as 
against  a  yearly  public  revenue  of  $4,000,000,  of  which  some  60  per 
cent  is  derived  from  import  duties. 

The  more  pressing  needs  of  this  Republic,  as  elsewhere  in  Latin 
America,  are  adequate  commercial  credits  and  facilities  to  dispose  of 
the  coffee  crop. 

Nicaragua. — The  present  monetary  system  of  Nicaragua  is  based 
upon  a  theoretical  gold  standard,  of  which  the  cordoba  forms  the 
unit- — with  a  circulation  of  silver  coins  and  bank  notes  guaranteed 
to  be  payable  in  gold — the  old  paper  peso  circulation  being  retired 
at  a  fixed  rate  of  $12.50  pesos  for  each  cordo'ba. 

The  foreign  debt  of  Nicaragua  is  comparatively  small  and  con- 
sists of  $1,500,000  treasury  notes — held  mostly  in  the  United  States — 
and  $6,000,000  of  outstanding  bonds  held  in  Europe,  as  against  a 
public  revenue  of  about  $2,000,000. 

Honduras. — The  monetary  system  of  this  Republic  is  on  a  silver 
basis,  with  the  silver  peso  as  the  unit — subject,  therefore,  to  fluctu- 
ation of  that  metal  in  the  open  markets  of  the  world. 

The  foreign  debt  of  Honduras  is  estimated — barring  the  validity 
of  the  obligations — at  $120,000,000,  of  which  a  very  large  portion 
covers  40  years  or  more  of  unpaid  interest.  The  internal  debt 
amounts  to  $2,500,000,  as  against  Government  revenues  of  approxi- 
mately $2,000,000. 

Salvador. — The  standard  monetary  unit  of  Salvador  is  the  silver 
peso,  likewise  subject  to  the  rise  and  fall  of  the  white  metal.  The 
circulation  consists  of  silver  and  bank  notes  convertible  into  silver 
and  secured  by  metallic  reserve  and  other  assets  of  the  issuing 
banks. 

The  outstanding  debt  is  approximately  $4,000,000,  with  internal 
obligations  of  about  $6,000,000,  as  against  $7,000,000  of  public  rev- 
enues, of  which  customs  duties  represent  more  than  $4,000,000. 

The  Government  of  Salvador  is  lending  every  encouragement  for 
the  establishment  of  banks,  both  commercial  and  savings,  and  in  this 
field  capital  could  be  most  advantageously  employed. 

Guatemala. — Only  nominally  on  a  silver  basis — Guatemala  de- 
pends upon  an  inconvertible  paper  currency  for  its  circulation,  with- 
out any  fixed  value  with  relation  to  gold  or  foreign  exchanges.  The 
bank  notes  are  issued  without  »ny  Government  guaranty,  with  the 


92  REPORT  ON   CENTRAL  AMERICA. 

latter  indebted  to  the  banks  for  about  the  amount  of  the  outstand- 
ing circulation — payable  in  the  form  of  paper  currency — which  is 
reported  to  be  approximately  100,000,000  pesos. 

The  foreign  debt  of  Guatemala  is  about  $11,500,000,  as  against 
public  revenues  of  $2,500,000. 

Our  committee  member,  Mr.  John  Clausen,  likewise  serving  as 
chairman  of  the  permanent  group  committee  for  Guatemala,  has  pre- 
pared a  special  report  on  that  country,  which  it  is  of  interest  here 
to  quote: 

Latin  America  offers  promising  markets  for  commercial  expansion  on  account 
of  its  rich  natural  resources.  Never  since  our  sister  Republics  severed  the 
political  ties  with  Europe  has  there  been  such  an  opportunity  for  us  to  widen 
the  scope  of  our  commercial  activities  among  them. 

Central  America  forms  a  separate  unit  and  comprises  the  live  Republics 
lying  between  Mexico  and  Panama,  viz,  Guatemala,  Salvador.  Honduras,  Nica- 
ragua, and  Costa  Rica,  with  a  combined  area  of  174,000  square  miles  and  a  popu- 
lation of  about  5,500,000  inhabitants. 

The  Republic  of  Guatemala  covers  an  area  of  about  50,000  square  miles,  with 
an  estimated  population  of  2,120,000  inhabitants  (the  largest  of  any  Central 
American  country),  of  which  125,000  reside  in  the  capital,  Guatemala  City. 
The  name  "  Guatemala  "  is  probably  of  Aztec  origin,  and  is  said  to  mean  "  Land 
of  the  Eagle."  The  bulk  of  its  people  are  located  in  that  half  of  the  Republic 
bordering  on  the  Pacific,  with  a  few  settlements  on  the  north  or  on  the  Atlantic 
side.  Its  mountain  ranges,  with  very  little  exception,  give  the  country  an 
elevation  of  from  4,000  to  11,500  feet.  The  Pacific  slope  is  very  fertile,  and 
produces  large  crops  of  coffee,  corn,  and  sugar ;  while  on  the  Atlantic  side  there 
is  found  very  little  agricultural  wealth,  except  from  the  cultivation  of  bananas 
in  the  lowlands  and  near  the  coast.  The  production  of  coffee,  however,  is  the 
principal  money  crop  of  the  country — moved  largely  upon  funds  that  have  been 
advanced  for  that  purpose — and  on  its  marketing,  therefore,  depends  much  of 
the  prosperity  of  the  Republic. 

It  is  one  of  the  most  beautiful  countries  in  Central  America,  with  riches  in- 
calculable. Close  observers,  travelers,  and  investors  have  been  so  impressed 
with  its  great  potential  richness  as  to  prompt  the  unique  saying,  "  If  you  tickle 
the  ground  with  a  hoe,  it  smiles  back  with  a  yam." 

The  guiding  force  of  Guatemala  is  its  president,  Manuel  Estrada  Cabrera, 
who  was  born  in  Quezaltenango,  Guatemala,  on  the  21st  clay  of  November,  1857, 
succeeding  Gen.  Reina  Barrios  during  the  tragic  events  of  February,  1898.  He 
was  later  elected  constitutional  chief  executive  of  Guatemala  on  October  20, 


GuatemeLa  has  a  good  system  of  primary  education.  It  is  of  interest  to  men- 
tion that  English  is  compulsory,  and  that  proficiency  in  that  language  is  a  pre- 
requisite to  the  degree  of  bachelor  of  arts. 

According  to  the  report  of  the  minister  of  finance,  made  under  date  of  April 
14,  1915,  the  debt  of  Guatemala  amounted  to  $13,304,759.79,  United  States  gold, 
made  up  as  follows : 

English  debt $11,  785,  314.  39 

Internal  debt__  1,519,445.40 


Total  debt  (including  railroad  obligations) 13,304,759.79 

Guatemala's  external  obligations  consist  of  what  is  called  the  English  debt  of 
4  per  cent  which  was  not  contracted  by  the  present  administration,  but  dates 


REPORT   ON    CENTRAL  AMERICA.  93 

back  to  the  time  when  all  Central  America  was  one  federation  of  Republics,  or, 
in  other  words,  since  the  independence  of  Guatemala  was  established  in  the 
year  1821. 

Upon  the  breaking  up  of  the  federation,  three-fourths  of  this  obligation  fell 
on  Guatemala,  while  the  remainder  (one-fourth)  was  allotted  to  the  other  four 
Republics.  Subsequent  administrations  increased  the  debt  by  additional  loans 
raid  delinquency  in  paying  interest,  until  it  reached  the  aforementioned  fig- 
ure. No  new  foreign  loans  have  been  contracted  by  the  present  Government. 

Only  during  the  lust  few  years  has  Guatemala  effected  a  material  settlement 
with  its  English  creditors  in  resuming  payment  of  interest. 

The  service  of  the  English  debt  requires  only  $300..000  United  States  gold 
annually  for  interest,  which  is  conveniently  cared  for,  as  the  Republic  has  a 
favorable  trade  balance  of  approximately  $3,500,000  United  States  gold  and  a 
net  internal  revenue  of  $1,000,000  to  $2,000,000  United  States  gold.  In  naming 
these  figures,  however,  it  must  necessarily  be  taken  into  consideration  that  the 
European  war,  together  with  prevailing  inadequate  transportation  facilities, 
may  tend  to  decrease  the  Government  revenues.  The  internal  indebtedness — 
which  amounts  to  approximately  $8,000,000  United  States  gold — has  been  found 
difficult  to  liquidate,  with  the  result  that  the  obligation  is  constantly  increasing 
through  delinquency  in  payment  of  interest. 

The  English  loan,  however,  in  spite  of  the  expenditure  of  large  sums  on  public 
work  and  charitable  institutions  of  the  country,  has  received  its  interest  in 
advance,  and  this  feature  is  being  favorably  commented  upon  by  British  capi- 
talists. These  bonds  have  been  quoted  during  the  greater  part  of  the  year  at 
40  to  41,  netting  the  holders  nearly  10  per  cent  per  annum. 

Unlike  some  other  Latin-American  Republics,  the  municipalities  of  Guate- 
mala have  no  bonded  indebtedness,  and  their  temporary  advances  from  local 
banks  are  automatically  repaid  from  taxation.  The  paper  currency  of  the 
banks  has  for  many  years  been  on  a  depreciated  basis — inconvertible  on  account 
of  no  specie  upholding  its  value — and  it  is  estimated  that  the  total  amount  out- 
standing at  the  present  time  is  approximately  100,000,000  pesos,  the  further 
Issue  of  which,  however,  is  being  discouraged. 

While  the  external  transactions  of  Guatemala  are  liquidated  in  gold  and  the 
duties  in  part  imposed  on  that  basis,  the  actual  currency  of  the  country  consists 
of  notes — theoretically  payable  in  silver,  but  not  so  redeemed — issued  by  the 
following  six  banks:  Banco  Internacional  de  Guatemala,  Banco  Colombiano, 
Banco  de  Guatemala,  Banco  Agrfcola  Hipotecario,  Banco  Americano  de  Guate- 
mala, Banco  de  Occidente.  Authorities  affirm  that  it  would  take  approximately 
$12,000,000  in  gold  to  place  and  maintain  the  country  on  a  gold  basis. 

Supply  and  demand  alone  regulate  not  only  the  value  of  the  currency  but  also 
the  rate  of  exchange.  What  chances  there  may  be  for  converting  the  paper 
money  now  in  circulation  into  specie  bills  depends  wholly  upon  the  desire  of  the 
Government  to  effect  a  suitable  currency  reform. 

Among  the  measures  taken  to  meet  these  economic  difficulties  stands  the 
decree  of  recent  date  which  authorizes  the  coinage  and  circulation  of  $2,000.000 
Guatemala  money  in  copper  coins  of  25  and  124  centavos  to  stabilize  the  medium 
of  circulation  and  facilitate  business  transactions.  To  prevent  these  coins 
from  being  shipped  out  of  the  country,  as  has  been  the  case  with  former  metal 
coinage,  a  restrictive  measure  has  been  placed  in  effect  prohibiting  the  export 
of  copper,  aluminum,  zinc,  and  other  alloys. 

Perhaps  if,  instead  of  gold,  the  silver  standard  were  adopted,  Guatemala's 
interest  would  be  better  served,  although  the  rise  and  fall  in  the  price  of  the 
white  metal  might  occasionally  unsettle  conditions.  For  one  reason  or  another 
the  necessity  of  changing  the  monetary  system  has  not  heretofore  made  itself 


94  REPORT  ON    CENTRAL  AMERICA. 

vitally  felt.  Inconvertible  paper  money  may  even  enlist  energetic  supporters, 
especially  among  coffee  growers  and  producers  in  general,  who  find  it  profitable 
to  pay  their  laborers  in  paper  money  and  receive  gold  for  their  exports. 

In  the  face  of  these  arguments,  however,  we  must  not  lose  sight  of  the  fact 
that  many  disadvantages  which  result  from  the  depreciated  paper  peso  neces- 
sarily affect  Guatemala  in  its  foreign  commerce  as  in  domestic  transactions,  by 
making  dearer  all  articles  of  consumption  and  so  encouraging  the  importation 
of  poorer  grades  of  food  and  necessities  of  life.  This  likewise  applies  to  the 
importation  of  machinery  necessary  in  agricultural  and  other  industries  and 
in  no  small  measure  to  the  increased  burden  of  the  taxpayer  to  pay  for  the 
Government  purchases  and  services  in  foreign  countries,  which  are  made  in 
the  equivalent  of  gold. 

It  must  be  remembered  that  in  reforms  of  a  monetary  character  the  exchange 
depends  on  the  balance  of  trade  rather  than  the  economic  balance.  The  rela- 
tion of  gold  and  silver  with  inconvertible  paper  money  can  not  always  be 
in-ranged  by  legislative  act. 

Guatemala  has  only  one  means  of  going  over  to  a  gold  or  silver  standard,  and 
that  is  to  cultivate  its  own  industries,  extending  principally  its  agricultural 
development.  This  can  not  be  the  work  of  a  day.  Other  nations  were  years 
and  years  accomplishing  this  end, 

A  change  to  a  metal  standard  would  undoubtedly  prove  of  great  benefit  to 
commerce.  On  the  other  hand,  agriculture  might  suffer  thereby,  and  it  may 
perhaps  be  wiser  to  establish  a  system  where  the  paper  peso  would  be  given 
the  value  of  50  cents  gold,  guaranteed  by  the  commensurate  deposit  of  like 
metal,  which  would  no  doubt  lend  stability  to  foreign  exchanges  as  well. 

There  is  said  to  be  about  $750,000  in  United  States  gold  in  the  Republic  si  ml 
approximately  100,000,000  to  110,000,000  pesos  of  Guatemalan  paper  money  in 
circulation. 

A  few  observations  may  not  be  amiss  in  relation  to  <_ii>v«tr'mu".ii  finances.  :\tnl 
the  figures  to  follow  may  prove  convincing  in  that  respect. 

The  yield  of  the  public  revenue  in  1915  was  $85,007,704.74  pesos,  us  uj?air»st 
$82,399,924.55  pesos  in  1914. 

The  public  expenditures  for  1915  were  $67,841,283.64  pesos,  which  exceeded 
the  amount  estimated  by  $7,778,643.65  pesos. 

The  total  value  of  trade  in  1915  was  $16,639,061.99  gold,  as  against 
$22,085,141.48  gold  in  1914.  On  the  other  hand,  between  the  imports,  amount- 
ing to  $5,072,473.03  gold,  and  exports,  aggregating  $11,566,585.96  gold,  there  was 
left  a  favorable  trade  balance  for  Guatemala  of  $6,494,109.93  gold. 

Two  causes  especially  affect  Central  American  trade  and  finance— the  loss  of 
the  usual  market  in  Europe  and  the  inadequacy  of  transportation  facilities. 
The  Republic  of  Guatemala  in  particular  lost  its  normnl  outlet  for  coffee — the 
largest  of  its  export  commodities. 

A  very  cordial  feeling  has  been  developed  in  Guatemala  toward  the  United 
States,  and  while  a  good  portion  of  their  imports  originate  in  this  country,  a 
much  larger  percentage  of  business  transactions  should  be  exploited  as  a 
result  of  the  favorable  opportunities  at  present.  To  make  our  appeals  forcible 
it  becomes  necessary  to  invest  more  capital  in  the  Republic,  to  extend  more 
liberal  credits,  to  improve  banking  facilities  for  export  trade,  and  to  make 
more  direct  and  personal  efforts  in  their  markets.  At  present  they  need 
financial  assistance  and  shipping  facilities  perhaps  more  than  other  Latin- 
American  countries.  It  is  essential  for  the  maintenance  of  the  foreign  pur- 
chasing power  of  Guatemala  to  lend  help  in  developing  and  marketing  its 
products  abroad. 


REPORT  ON   CENTRAL   AMERICA.  95 

THE    EXCHANGE    PROBLEM. 

The  exchange  problem  is  at  times  a  serious  impediment  to  a  free 
expansion  of  trade  between  Central  American  countries  and  the 
United  States.  The  severity  of  this  problem  exists  in  different  de- 
grees in  the  several  countries  forming  Central  America  and  arises 
from  the  monetary  systems  in  practice  and  the  extent  to  which 
America  is  able  to  buy  from  Central  America.  As  an  example,  coffee, 
which  constitutes  so  great  a  proportion  of  the  merchantable  products, 
finds  its  market  in  Europe,  and  the  American  market  absorbs  very 
little  of  it.  The  speculation  in  exchange  is  a  vicious  condition  in 
trade  and  leads  to  a  disinclination  on  the  part  of  some  old  established 
mercantile  houses  to  see  the  monetary  systems  placed  upon  a  sound 
basis,  because  such  a  condition  would  narrow  exchange  fluctuation 
and  remove  chances  of  profitable  speculation  in  exchange. 

The  principal  hindrance  to  investment  of  capital  arises  in  a  measure 
from  fear  of  security  of  peaceful  possession  of  the  property  and  the 
uncertainty  of  governmental  legislation  affecting  the  interests  of  the 
investor.  Capital  shrinks  from  the  obligation  of  constant  vigilance 
over  political  legislation  and  the  probability  of  being  forced  to 
engage  in  lobbyism  and  political  intrigue  to  protect  its  interests,  and 
these  conditions  deter  investments. 

If  these  impediments  were  removed  and  assurance  were  possible 
from  damage  by  force  or  legislation,  capital  would  be  tempted  to 
investigate  the  opportunities  in  the  lumber,  cattle,  mining,  agricul- 
tural, and  transportation  resources  of  the  several  countries,  and  con- 
siderable progress  would  no  doubt  result  therefrom  calculated  to 
speedily  increase  the  very  small  foreign  trade  of  the  countries. 

But  these  problems  are  difficult  of  solution  owing  to  the  disinclina- 
tion of  the  several  countries  to  cooperate.  Intercountry  rail  trans- 
portation is  practically  nil,  and  until  conditions  are  arrived  at  which 
warrant  capital  investment  for  this  purpose,  the  same  ignorance  and 
consequent  suspicion  will  last  which  to-day  prevents  any  intelligent 
intercountry  cooperation.  To-day  only  adventurous  capital  is  war- 
ranted to  develop  the  natural  resources,  and  undoubtedly  there  is 
room  for  a  certain  amount  of  capital  to  facilitate  actual  commercial 
transactions  in  the  several  capitals,  but  the  returns  on  such  capital 
are  incommensurate  with  the  cost  of  operation  when  it  is  considered 
that  this  capital  would  be  divided  up  among  the  several  countries  in 
ratio  to  the  demands  and  opportunities.  Serious  capital  will  un- 
doubtedly wait  until  financial  and  political  conditions  of  the  several 
countries  are  brought  more  nearly  on  a  sound  basis. 

Until  dangers  from  force,  from  revolution,  arising  either  through 
internal  or  external  causes,  are  removed,  and  assurance  is  given  from 
insecurity  arising  through  political  legislation,  conservative  capital 


96  REPORT  ON   CENTRAL  AMERICA. 

will  hold  aloof  and  no  great  improvement  of  conditions  can  be 
reasonably  expected.  Except  from  the  courageous  investment  of 
adventurous  capital,  it  does  not  seem  probable  that  great  develop- 
ment will  take  place. 

TRADE  AND  FISCAL  RELATIONS. 

It  is  deemed  appropriate,  in  connection  with  the  foregoing  report, 
to  add  an  article  recently  written  by  Mr.  Ling,  a  member  of  the 
commission,  telling  how  trade  and  fiscal  relations  with  Central 
American  countries  may  be  developed  and  of  the  obstacles  which 
must  be  overcome.  The  article  is  as  f ollows : 

A  visit  to  the  countries  forming  Central  America,  viz,  Panama,  Costa  Rica, 
Nicaragua,  Honduras,  Salvador,  and  Guatemala,  discloses  primarily  the  funda- 
mental fact  that,  as  in  the  case  of  the  countries  forming  South  America,  each 
country  must  be  regarded  as  a  unit  and  that  it  is  not  proper  to  group  them  in 
considering  their  economic  and  political  development.  These  countries,  while 
possessing  similar  conditions  as  to  topography  arid  products,  are  each  separate 
and  tenacious  of  their  individual  integrity,  customs,  and  nationality. 

The  recent  visit  to  each  of  these  countries  was  at  an  unfortunate  time  in  the 
sense  that  economic  conditions  there  are  rendered  abnormal  due  to  the  European 
war,  when  a  very  serious  falling  off  in  imports  has  decreased  Government 
revenues  and  the  inability  to  ship  their  products  of  coffee  has  decreased  pur- 
chasing power.  The  bulk  of  the  coffee  has  been  heretofore  purchased  by 
Europe,  where  on  account  of  its  fine  flavor  it  has  found  a  ready  market;  but 
to-day  a  greater  effort  is  being  made  to  introduce  coffee  into  the  American 
market.  A  greater  consumption  of  Central  American  coffee  by  the  United 
States  will  very  materially  tend  to  increase  the  exchange  facilities  between  the 
two  countries  which  is  at  the  present  time  a  real  hindrance  to  increased  trade 
between  the  countries.  It  is  generally  conceded  by  the  merchants  in  Central 
America  that  the  United  States  is  the  natural  supply  market  for  them,  although, 
owing  to  the  greater  knowledge  of  European  merchants  and  the  natural  pro- 
pensity of  the  Central  American  to  visit  Europe  rather  than  the  United  States, 
European  goods  are  prevalent  in  Central  America. 

MUST   ESTABLISH    CREDIT   AND   OTHER   DIRECT   FACILITIES. 

The  chief  criticism  one  encounters  in  Central  America  is  that  the  United 
States  manufacturers  do  not  send  their  representatives  into  the  country  and 
do  not  cater  to  their  business,  and  are  not  willing  to  give  the  necessary  credits. 
These  countries  are  agricultural  countries  and  the  credit  season  is  from  crop  to 
crop.  The  most  favored  form  of  credit  desired  by  the  Central  American  mer- 
chants seemed  to  be  the  "  revolving  credit "  which  Europe  has  given  them,  but 
there  appeared  to  be  a  general  desire  for  a  modified  credit  of  say  90  days  sighu 

In  the  cities  of  the  countries,  especially  in  Costa  Rica,  Salvador,  mid 
Gauteinala,  the  supplies  of  merchandise  in  the  stores  of  the  larger  merchants 
present  a  very  good  appearance,  and  more  and  more  American  goods  are  making 
an  appearance.  There  appeared  to  be  surprisingly  few  failures,  and  there  is 
no  doubt  that  in  each  of  these  countries  there  are  well-established  merchant? 
and  enough  of  them  to  warrant  more  energetic  sales  campaigns  by  American 
manufacturers. 


REPORT   ON    CENTBAL:AMfe,ft)3CJi5;  97 

FIRST   RESULTS   OF  PAN    AMERICA^ 


The  recent  establishment  of  the  credit  information  bureau  in  connection  with 
the  new  chamber  of  commerce  at  Panama,  and  similar  steps  in  some  of  the 
other  countries  which  seem  to  have  been  prompted  by  the  recommendations 
made  at  the  late  financial  congress,  indicate  that  there  is  a  growing  desire  on 
the  part  of  the  merchants  themselves  for  their  own  protection  and  for  the 
extension  of  their  trade  to  furnish  credit  information  similar  to  that  which 
is  readily  obtainable  in  the  United  States  and  which  heretofore  they  have  not 
been  accustomed  to  give  freely. 

These  countries  are  fully  alive  to  the  necessity  of  peaceful  progress,  and 
we  can  not  visit  the  countries  and  take  note  of  their  increasing  educational 
establishments  and  social  and  economic  endeavors  without  feeling  sympathy 
for  the  difficulties  with  which  they  have  to  cope  and  the  apparent  earnest- 
ness with  which  they  are  undertaking  the  work.  There  is  scope  for  greatly 
increased  production  and  purchasing  power,  but  it  seems  likely  to  be  of  slow 
growth.  There  is  no  manufacturing  to  speak  of,  and  consequently  almost 
everything  has  to  be  imported.  Clothing,  hardware,  foodstuffs,  chemicals,  and 
drugs  find  a  market.  It  is  fairly  easy  to  ascertain  the  names  of  the  principal 
merchants  in  these  countries  from  the  consular  records  and  the  banks.  The 
countries  are  easy  of  access,  and  the  best  way  to  sell  is  to  send  travelers  there. 
All  prices  should,  of  course,  be  quoted  in  United  States  dollars,  and  rigid 
attention  paid  to  filling  and  packing  the  orders. 

Agriculture  in  some  of  these  countries  is  carried  on  in  a  somewhat  elementary 
way,  and  the  natural  assumption  is  that  a  demonstration  of  the  advantages 
of  employing  more  modern  methods  and  machinery  would  result  in  increased 
sales  of  agricultural  machinery  and  tools.  As  time  goes  on  it  is  probable 
that  increased  interest  in  manufacturing  will  rise  and  lead  to  a  market  for 
industrial  machinery. 

OPPORTUNITIES   FOB   CULTIVATING   BETTER   TRADE   RELATIONS. 

The  natives  appear  to  possess  an  adaptability  to  industry,  as  is  shown 
wherever  they  are  employed  in  native  industries,  and  they  are  good  agricul- 
tural workers. 

Considerable  interest  is  now  manifested  in  the  cattle  industry,  and  appear- 
ances lead  to  the  conclusion  that  this  industry  is  at  least  worthy  of  careful 
examination  and  attention  with  reference  to  the  establishment  of  frigorificos, 
so  that  a  ready  market  may  be  established  for  cattle.  As  education  and  social 
upraise  take  place  the  balance  wheel  of  a  middle  class  will  be  created  which 
should  tend  to  assure  peaceful  progress  and  greater  desires  and  consequent 
greater  markets. 

There  appears  to  be  room,  too,  for  investigation  of  the  possibility  of  increasing 
the  purchase  of  the  hardwoods  and  mahogany  of  Central  America.  To  the  extent 
that  we  are  able  to  increase  our  consumption  of  the  natural  products  of  the  coun- 
tries we  shall  be  able  to  that  much  further  increase  our  ability  to  sell  our 
products  there.  There  can  be  no  doubt  of  the  suitability  of  the  countries  for 
great  development,  as  is  demonstrated  by  the  area  adjacent  to  the  Panama 
Canal,  which  presents  such  a  striking  contrast  to  some  of  the  portions  of  the 
country  no  worse  situated  naturally. 

Evidences  were  not  wanting  which  indicated  a  certain  distrust  of  United 
States  citizens  engendered  by  the  unsatisfactory  results  from  concessions  granted 
to  incompetent  and  in  some  cases  irresponsible  concessionaires,  and  it  would  not 
1063—18 7 


98  KXrOKT.ON   CENTRAL  AMERICA. 


be  surprtei'i;-;  &  ,ih€  Yur>o'is  4'Joverniaents  protected  themselves  by  cancellation 
of  noneznpteyed  ^o^cvssiorife  and  adopted  a  much  more  stringent  policy  in  future 
as  to  concessions. 

SOME  OBSTACLES  TO  OVEECOME. 

Except  in  the  coast  regions  the  climate  is  conducive  to  active  work  and  is  not 
debilitating.  At  the  present  time  a  degree  of  dissatisfaction  exists  in  the  minds 
of  many  Central  American  merchants  because  they  feel  that  we  are  not  keen 
to  supply  them  and  to  give  them  the  satisfactory  terms  and  treatment  that  they 
have  received  from  Europe,  and  due  allowance  is  not  given  the  United  States 
merchant  for  the  additional  burdens  imposed  upon  him  by  the  abnormal  war 
conditions,  where  he  is  called  upon  to  supply  a  large  part  of  Europe's  demands 
in  addition  to  the  usual  domestic  trade  and  Latin  American  trade  also.  There 
is,  however,  a  moderate  market  in  Central  America,  which  will  grow  and  which 
is  well  worth  cultivating  at  this  time  if  we  desire  to  increase  our  permanent 
trade  in  that  section  of  the  world.  My  impression  of  the  Government  officials 
and  men  in  business  and  social  life  is  that  they  are  earnest,  sincere,  and 
remarkably  well  educated  and  pleasant  to  deal  with. 

A    WORD   OF    THANKS. 

The  commission  spent  two  months  on  its  journey.  It  would  have 
been  impossible  to  visit  all  these  countries  in  such  a  brief  time  had  it 
not  happened  that  the  United  States  Government  placed  the  U.  S. 
cruiser  Cleveland  at  the  command  of  the  commission  for  the  trip  up 
the  west  coast.  A  word  of  thanks  is  due  to  Lieut.  E.  S.  Boot,  who 
commanded  the  vessel,  and  also  to  the  other  officers,  for  the  splendid 
manner  in  which  they  looked  after  the  comfort  of  the  commission. 

Kespectfully  submitted  on  behalf  of  the  commission. 

LAMAR  C.  QUINTERO,  Chairman. 

NEW  ORLEANS,  June  12,  1916. 

o 


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